Policies needed against petroleum price spikes
Credit to Author: The Manila Times| Date: Sat, 05 Oct 2019 17:42:04 +0000
Motorists are still reeling from the oil price spike that occurred after the Sept. 14, 2019 attack on a Saudi oil facility. Even as world leaders debate whether Iran was responsible, there is concern about the impact on inflation and perhaps on the economy. Fortunately, tensions have eased somewhat causing pump prices to fall, but this whole incident should worry us enough to consider policy changes needed to protect consumer interests and ensure energy security.
Before we get to our recommendations, we should rule out reviving the regulation of fuel prices. The defunct Oil Price Stabilization Fund was a mistake, and we still prefer market forces in influencing fuel costs. Having said so, there is the problem of price spikes that we experienced again recently.
First, there ought to be more transparency in how local oil firms set pump prices. Earlier, Albay Second District Rep. José María Clemente “Joey” Salceda questioned the hefty price hike, accusing oil firms of “taking advantage of the windfall.” In past episodes of suspiciously high fuel prices, some called for the government to inspect the financial books of petroleum companies. That would not only have a chilling effect on business, but would also create opportunities for corruption.
Instead, we have argued many times in this space that oil companies should be compelled to list publicly. For now, only Shell Philippines is required to do so, but it has successfully fought that in court. In fairness to Shell, all oil companies should be required to list. The activities of listed firms are highly scrutinized by regulators and investors. Granted, listing is not a fool-proof solution.
But at least the public can enjoy the opportunity to have a share of any windfall by purchasing shares of their stock. Plus, having more firms listed is beneficial to the stock exchange, which can then offer more investment options.
Second, the Philippines should develop more strategies to lessen its dependence on oil. In 2018, the Philippines imported more than $700 billion worth of petroleum products. That was about 30 percent higher than in 2017. Filipinos are so hooked on petroleum that we have become more sensitive to its price movements. Obviously, the most vulnerable are motorists and the transport sector.
For starters, the government should incentivize the use of electric vehicles and other means of transport that run on significantly less petroleum or operate entirely on alternative fuels. Similar policies have been in place in other countries, but the Philippines remains way behind. Besides, the usage of environmentally friendly vehicles will reduce pollution and improve the overall quality of life.
But it makes little sense if we recharge electric vehicles with power generated by plants that run on petroleum and other fossil fuels. And while we support calls for the development of clean energy plants, the problem has to do with base load. That is, power plants need to generate a steady supply, not just when the wind is blowing or when the sun is shining.
With that, we urge our leaders to review and craft new policies that will ensure the security of the country’s energy supply. The government should accelerate plans to develop green energy, like wind and solar and possibly even ocean waves. At the same time, we should look for alternative fuels that address the base-load problem.
We should consider all possible alternatives, even controversial ones. One that was dismissed long ago is nuclear energy. To be clear, we are against reviving the mothballed Bataan Nuclear Power Plant. Even if that plant can be made operational, its technology is old. Newer ones are more efficient and safer.
One that caught our eye was the project of the Bill and Melinda Gates Foundation that was featured recently on Netflix. The Gates funded the firm TerraPower in developing a new kind of reactor that runs on spent fuel rods, which are waste products. But the project has stalled because of the US-China trade war. Perhaps our government should look into bringing that technology here instead, while China is not an option for Americans. The point is, as the saying goes, leave no stone unturned.