Why the high price of fuel is a given, with or without Train
TITO F. HERMOSO
The road to hell is paved with good intentions. Two decades ago, fuel price movements were greatly influenced by motives like a greener future and energy security, all noble when one considers that legislating laws mandating biofuel blends and subsidies help moribund or budding biofuel refiners. Today, it is the Train law, which raised taxes on fuels to more-or-less international price levels in order to fund our massive infrastructure ambitions. With world prices increasing, vote-conscious legislators again want to tinker with fuel pricing.
The cause of today’s rising energy prices is a stew of factors that are the result of nature’s fickleness, human behavior due to speculation, prosperity, expanding population, diminishing natural resources, technological advancement and of course, the all-powerful law of supply and demand. Things are not helped by a US President who tweets his own baseless and vacuous understanding of how that law should work.
We cannot have our cake and eat it too. If we want clean air, we will have to pay for more expensive fuel blends and until the time technology discovers compensatory products, we are stuck with biofuel additives that burn faster, raising fuel consumption in the case of gasoline. If we want no more traffic, we cannot avoid footing the bill for mass transit despite our habit of wishing away the traffic monster without basically doing anything else.
Sometimes, like chemotherapy, the cure is more painful than the disease. We may also end up making a bad situation worse. The problem lies in the static nature of some laws, the biofuels one in particular. Having mandated a specific additives – ethanol and coconut methyl ester– our refineries are bound by law to keep adding more and more regardless if these cost more per liter than the base fuel and regardless if technology can create better, cleaner and, more importantly to the consumer hit by rising prices, cheaper additives. Today’s rising prices are due to our helplessness to do nothing but bow to the call of the gods that control the prices of oil in the world market and the panicky businessmen that control Wall Street.
All the published urban figures show no improvement in air quality as of yet. The greenies will argue all the more reason to put more ethanol and CME and giving it more time. The fact remains that newish cars that guzzle bioethanol are in the minority. The nation’s transport fleet still mostly runs on dirty diesel engines using dirty diesel fuel. But the four-wheeled motor vehicle is not the biggest culprit. The biggest and most prevalent polluters are the tricycles. Hope now clings to the very proximate future of an automotive world propelled by plug-in electrics, hybrids and artificial intelligence.
The reality of today’s traffic displays to you another law at work: that of least resistance. As car, truck, bus and jeepney emissions and traffic are regulated, the enterprising public gravitate to the unregulated sector. Witness the explosion in the population of pedicabs, motorcycles and tricycles. Convenient but not cheap, the presence of tricycles anywhere is both good and bad. It’s a go-anywhere convenience, even if riding passengers have to assume the fetal position, and never mind if a nocturnal ride costs more than a solo passenger taxi ride in an air-con Vios. Never mind also if the noise alone fosters depressed property values as their to-ing and fro-ing destroy the neighborhood’s peace and quiet.
Anywhere you find tricycles in this country, you will find unruly traffic and “dangerous” roads as accidents happen when overloaded and slow-moving tricycles are prevalent. Whatever passes for regulations vary depending on the vested interest and level of expertise of the barangay or municipal council. Unless drastically regulated, there is no stopping their phenomenal growth as tricycle incomes are hardly taxed, the public is willingly fleeced/robbed and public road safety deteriorates.
It doesn’t mean that we shouldn’t try overall. The problem in drafting biofuel law or tricycle ordinances or tax reform laws to fund mass transit railways is when you have lawmakers and technocrats doing so with little or zero understanding of the technical issues. Nothing wrong here; that’s what hiring consultants and experts are for. But then who decides who is an expert? There are smoothies who impress the ignorant with mouthfuls of facts, detail, minutiae and jargon. Espousing easily obtainable internet facts chosen to serve an agenda without the benefit of training in the thinking sciences does not make one a scientist nor a scientific expert.
There are consultants or experts who have an agenda, a vested interest or an advocacy. Again, nothing wrong with being cause-oriented. But they should not pretend to be impartial and should immediately expose their advocacies for the sake of openness and honesty. If they are lobbyists or green advocates, say so. Oil industry experts speak their technicalities without denying where their paychecks come from, which doesn’t mean that they don’t have any valid expertise to share.
By mandating set percentages for biofuels, the law has made our fuel more expensive than it should be. The problem lies in that sugar, the source of ethanol, and coconut, the source of CME, also double as food. That wouldn’t be a problem if we have an excess of both. But because of long periods of low prices, farmers reduced the land area planted to these crops. Now, with the world’s expanding food needs, the result is upward pressure on food prices, and you can’t create and harvest surplus sugar and coconut overnight.
This was aggravated by the US’s erroneous move to subsidize corn-based ethanol production because of energy security paranoia. This is in contrast to the world’s most efficient producer of ethanol, Brazil, whose production of sugar is way in excess of its domestic and export needs. Moreover, their ethanol industry uses only the by-product of their huge sugar production. In the US, corn is mainly used for animal feed. When much of corn production was shifted to ethanol production, there was a shortage of animal feed, resulting in rising prices of beef. That’s not all. Because of generous subsidies for corn-based ethanol refineries, too much production flooded the market with a glut, bankrupting some of the subsidized ethanol refineries.
As for Train being the culprit for today’s high prices, expect that from myopic legislators who do not believe that a powerful global cartel rules over the world oil markets. If the latter decides to react to pronouncements of POTUS against the Iran nuke deal or a retaliatory tariff rise against China, they then see a chance to make even more money, inflationary pressures on consumer price indices and foreign exchange values of expanding economies be dammed. They who command the world oil economy won’t even care to know what our Train is all about.
So be not surprised if we can only enjoy lower fuel prices if our gasoline and diesel don’t have very expensive ethanol and CME. We’ve allowed our legislators to tie our hands with this one as the law deprived the industry of using cheaper and better blending agents, depriving the consumer of the flexibility of fuel choices during oil crises and economic stresses.
Rather than go into another round of populist bills creating another oil price stabilization fund, a luxury that even sensible oil-exporting nations dumped as a harmful failure, we should repeal the biofuels law and instead simply target Euro V or Euro IV standard fuels and engines for all and leave the recipe for achievement of clean fuels to science and technology, not legislation. With the global automotive trend towards electrification and artificial intelligence, the necessity of fossil fuels for cars will be offset by increased demand for fossil fuels for power generation. And the next time drafters of the law and ordinances invite consultants, the latter should be vetted for their beliefs, biases and advocacies.
We are not against vested interest for it is only when we do listen to them do we get to know where they are coming from. What we are against are vested interests that mask themselves as other than what they are, taking advantage of the lack of transparency and accountability. As for rising oil prices, it’s about time we stop barking up the wrong tree and mistake the wrong cause for the right effect.
Tito F. HERMOSO is Autoindustriya’s INSIDE MAN
Send comments to tfhermoso@yahoo.com
Editor’s note:
Some text from last week’s column was inadvertently cut. The correct paragraph follows:
“Beyond the obvious applications of funiculars in cities like Cebu, Cagayan de Oro and Davao, cities that have seashore and mountainside communities, funiculars can have an application in the Antipolo elevations of Metro Manila. Contrary to popular opinion, cable cars are not necessarily just for hilly or mountainous regions. Since funiculars have the advantage of less construction on the ground as cables are far lighter than beams or girders so pylons can be installed far apart, aerial trams can serve as efficient medium-capacity cross-metro commuter transport. Access to stations can be elevated by being co-hosted in the many upcoming mixed-used high rises going up in the metro, like those ubiquitous condos built by SMDC. Moreover, the cable pylons or towers have a footprint the size of an NGCP power line pylon and the great distance between pylons reduces the need to buy real estate, though again there may have to be an “air” rights compensation mechanism.
A first “MetroCable”, “Aerotram” or “FuniculaMLA” could begin at the Folks Art Theater/Cultural Center of Philippines area and terminate in the vicinity of the Antipolo Basilica of Our Lady of Good Voyage. Several reasons favor this route. For one, the west-to-east metro commuter only has scattered and dissonant PUV routes to choose from. The LRT-2 serves a radial route for the northeast quadrant of the city while the proposed LRT-4 is only a short stretch from EDSA to Rosario via Ortigas Ave.”
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