BY DAN MARIANO

As expected, President Gloria Arroyo’s decision to lift Executive Order 839—which froze the prices of fuel and other commodities as part of the administration’s response to the recent calamities—has led to a rise in the cost of gasoline, diesel and other oil products. In the coming weeks fuel prices are projected to rise even higher.
It was bound to happen but not just because the government tried to play the role of a populist good guy in the aftermath of devastating typhoons. EO 839 was more of a political response to the emergency, rather than an economic move—much less a smart one.

Fuel prices are also rising in other parts of the world, even in countries not affected by disasters, whether natural or man-made. Take the case of the United Kingdom.

A reader alerted this column to a report published the other day in a British daily, which showed UK fuel prices rising by 26 percent since the start of the year.

The unprecedented upswing in fuel prices was quickly blamed on the weak British pound and a government decision to raise the value-added tax on fuel. But another factor has added to the woes of UK motorists, the report said.

According to motoring groups in the UK, the oil giants also have a lot of explaining to do. British Petroleum, for instance, recently announced a 60-percent increase in profits earned in recent months. But BP and other oil companies are being accused of stockpiling products at near-record levels to keep prices up.

This sounds all too familiar to us Filipinos.

As the local subsidiaries of foreign oil giants were pressuring Malacañang to discard EO 839, gasoline, diesel and other oil products became increasingly scarce.

In many parts of the country, motorists have had to go from one filling station to another to buy fuel. Those stations that still kept their pumps open imposed strict rationing—no more than P500 worth of fuel per vehicle in most cases.

The economic impact of the fuel hoarding soon made itself felt in higher retail prices of many basic commodities, some of which actually disappeared from store shelves.

With the lifting of EO 839, oil supplies are projected to “normalize” soon—but at a much higher cost.

The fuel-price freeze only reinforced the notion that the government is powerless in the face of concerted action by the oil companies. Despite the official policy of deregulation, the so-called Big 3 and their smaller “rivals” continue to operate like an oligopoly.

The Philippines does not produce significant amounts of petroleum; what crude it is able to extract from its offshore wells are actually sold overseas. As such, the oil companies have got this country by the proverbial balls.

No amount of government pressure can make the oil companies bring down their prices. In this latest standoff, for instance, all that the Big 3 needed to do was to slow down their deliveries—and officials were soon crying, “Uncle!”

The Philippines is a comparatively small market from which the oil giants could afford to pull out if they are no longer able to continue racking up ever-increasing profit margins. This is precisely why the Saudi Aramco sold out its shares in Petron.

A return to state regulation of the downstream oil industry could lead to a similar flight by the other oil majors. Quarters agitating for a return to regulation find lots of support from public transport groups, motorists and the usual rabble-rousers; but that does not seem to bother either the Big 3 or the smaller industry players.

What could compel the oil companies to, in the words made famous by whistle-blower Jun Lozada, moderate their greed is a significant market shift toward other fuels and energy sources.

Laws have been passed to promote biofuels and renewable energy. Years ago, a project was launched to encourage bus companies to use compressed natural gas from Malam-paya. In Makati and other places, local initiatives have seen the introduction of electric jeepneys and propane-powered tricycles.

Sadly, none of these efforts has made a dent on the broader market.
The Department of Energy, far from being at the forefront of promoting the use of alternative and renewable energy, has been more preoccupied with, as some observers put it, “lawyering for the oil companies.”

What leverage the government used to have in the field of renewable energy it has surrendered to private interests. For instance, it sold off the country’s biggest producer of geothermal energy in order to bridge its budgetary deficit.

Developing alternative energy sources should be premised, not just on reining in the oil companies’ avarice, but more so on the fact that world is set to run out of petroleum in the not too distant future.

British researchers recently reviewed 500 studies from around the world and took into account the difficulty of accessing new oil fields as well as growing demand. The researchers’ finding: oil will begin running out before 2030—in fact, by 2020 or just 11 years from now.

The lead author of the researchers’ final report, Steve Sorrell, was quoted saying: “In our view, forecasts which delay a peak in conventional oil production until after 2030 are at best optimistic and at worst implausible. And given the world’s overwhelming dependence on oil and the time required to develop alternatives, 2030 isn’t far away.”

Other experts projected that as soon as oil begins to run out it will “make energy more expensive, sparking a knock-on effect on industry and economies around the world.” Oil prices will rise and long-distance travel will become even more expensive than it already is.
They were unanimous in the conclusion that the era of cheap oil is really over.

Instead of preparing for this inevitability, our officials are more concerned with—you guessed it—playing politics.

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