The price of oil surged past the US$75/barrel mark just last week, on concerns over the nuclear stand-off in Iran, the world’s second largest oil supplier after Saudi Arabia, on top of the already-tight global supply due to overstretched refining capacities. China’s insatiable need for oil (GDP grew a spectacular 10%++ in 2005) as it increasingly industrializes its economy, is putting a lot of pressure on existing demand world-wide contributing to the supply glut.
Since we import roughly 99% of our oil requirements, we are vulnerable to price volatilities brought about by simmering political tensions in the oil-rich Middle East, just like everybody else. Even OPEC member Indonesia is not spared.
Ordinary people are feeling the pinch with the expected rise in fuel costs implemented by the main oil companies operating here. As a trigger effect, various transport groups are calling for a hike in the minimum passenger jeepney fares to P9 from the existing P7.50.
Obviously, higher fuel costs translate to higher prices in consumer goods as well. Unless global oil prices stabilize to lower levels, we remain hostage to the high price environment and we have to tighten our belts (again) for a rough ride ahead.
Some quarters, especially the ex-communists, are calling for the government to resurrect the Oil Price Stabilization Fund, to provide some cushion to consumers against high oil prices. The problem with this proposal is that in the past, the OPSF never worked. It only created an artificial domestic oil price regime, so that once the fund became depleted, consumers had a hard time adjusting to the drastic changes in prices and resulting surge in inflation.
And besides, funding the fund ultimately means the government will have to shoulder the difference between the market price and its artificially-set price, widening the government deficit further.
Other proposals like temporarily lifting the 12% EVAT on petroleum products may sound like a good idea. The downside is that the foregone revenues means putting a downward pressure on the deficit, resulting in credit ratings downgrades, which means higher interest rates, depressing domestic investments and ultimately constricting consumption already affected by skyrocketing oil prices. One thing leads to another. Eventually, it is a no-win solution. I guess the market will have to adjust to the painful situation and consumers have no choice but to basically grin and bear it.
In reducing reliance on oil, the main solution lies in our own backyard. Brazil has been quite successful in introducing ethanol as an alternative to oil for its transport needs. (Remember that Amazing Race episode where the contenders were made to distill ethanol from raw sugar canes to be used as fuel for their vehicles?) Let us be serious in looking for other fuel alternatives, really. I know zilch about science stuff so I don't know what to make of coco diesel in these parts, whether it is a poor, trying-hard copy of Brazil's ethanol or it has sound scientific and commercial merits. All I know is that we need to have something else, otherwise we'll be having this problem ad infinitum. Besides, with fuel alternatives, we can be sure oil companies will have a lesser hold on our throats, and we can breathe more comfortably too (other alternatives are more likely to be environment-friendly).
Since we import roughly 99% of our oil requirements, we are vulnerable to price volatilities brought about by simmering political tensions in the oil-rich Middle East, just like everybody else. Even OPEC member Indonesia is not spared.
Ordinary people are feeling the pinch with the expected rise in fuel costs implemented by the main oil companies operating here. As a trigger effect, various transport groups are calling for a hike in the minimum passenger jeepney fares to P9 from the existing P7.50.
Obviously, higher fuel costs translate to higher prices in consumer goods as well. Unless global oil prices stabilize to lower levels, we remain hostage to the high price environment and we have to tighten our belts (again) for a rough ride ahead.
Some quarters, especially the ex-communists, are calling for the government to resurrect the Oil Price Stabilization Fund, to provide some cushion to consumers against high oil prices. The problem with this proposal is that in the past, the OPSF never worked. It only created an artificial domestic oil price regime, so that once the fund became depleted, consumers had a hard time adjusting to the drastic changes in prices and resulting surge in inflation.
And besides, funding the fund ultimately means the government will have to shoulder the difference between the market price and its artificially-set price, widening the government deficit further.
Other proposals like temporarily lifting the 12% EVAT on petroleum products may sound like a good idea. The downside is that the foregone revenues means putting a downward pressure on the deficit, resulting in credit ratings downgrades, which means higher interest rates, depressing domestic investments and ultimately constricting consumption already affected by skyrocketing oil prices. One thing leads to another. Eventually, it is a no-win solution. I guess the market will have to adjust to the painful situation and consumers have no choice but to basically grin and bear it.
In reducing reliance on oil, the main solution lies in our own backyard. Brazil has been quite successful in introducing ethanol as an alternative to oil for its transport needs. (Remember that Amazing Race episode where the contenders were made to distill ethanol from raw sugar canes to be used as fuel for their vehicles?) Let us be serious in looking for other fuel alternatives, really. I know zilch about science stuff so I don't know what to make of coco diesel in these parts, whether it is a poor, trying-hard copy of Brazil's ethanol or it has sound scientific and commercial merits. All I know is that we need to have something else, otherwise we'll be having this problem ad infinitum. Besides, with fuel alternatives, we can be sure oil companies will have a lesser hold on our throats, and we can breathe more comfortably too (other alternatives are more likely to be environment-friendly).
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