This week—once again—we learn that the Philippines is an economic slave to global oil prices. As a result of Dubai crude climbing to the $59 per barrel range and European Brent crude already above the $60 per barrel price, fuel prices are going higher. Diesel products will be P2 per liter more, and gasoline products will have an increase of approximately P1.30 per liter.
Those with a political agenda—and little understanding of how this economy functions—will blame the administration. It is always easier to look for a scapegoat to a problem than to actually find solutions.
Homo sapiens have been around for 100,000 years and longer. But the correlation between population growth and the increasing use of crude oil is unmistakable. The same is true for global life expectancy and extreme poverty, child mortality and even literacy. The flat line growth of these began to strongly increase with the Industrial Revolution in the mid-1800s.
The world’s first oil refinery was built in 1856, distilling kerosene for lamps from seep oil. The first commercial oil well in Canada became operational in 1858. The first “modern” oil well was drilled in 1859 near Titusville, Pennsylvania.
We think of oil being used as the fuel for land transportation, and that accounts for 50 percent of worldwide demand. However, some 6,000 products are made from petroleum and petroleum by-products. Fifteen percent of crude oil is used to make petrochemicals that in turn are used to make the shirt on your back and the fertilizer and insecticides used in global agriculture.
While it ruins the narrative that government can control inflation, the global inflation rate trends up or down with oil prices. This is true for those nations where income from oil exports is not a significant part of the economy.
Of 98 countries, the Philippines ranks 68th in total oil production and 84th in per-capita output at 200 barrels per day. The nation is a slave to global crude oil prices.
By comparison, per-capita production is over 3,000 barrels per day in Thailand, Vietnam and Indonesia, while over 20,000 barrels per day is produced in Malaysia. We do not have crude oil. That is the reality.
Unless the piggery owner wants to eat only pork, the poultry farmer only chicken and the baker only bread, then they must sell their production to buy products from others. The Philippines must stop being at the mercy of the oil producers and must exploit our natural mineral resources.
The harvesting of all natural resources from timber to fish to minerals and oil comes with environmental problems. That is unavoidable but must be properly managed. Japan does not have oil resources and has built its manufacturing base to avoid being an oil slave. But the need to run its factories requires “cheap” electricity and nuclear power plants.
The idea that the Philippines can substitute oil with “renewable energy sources” is a fantasy. In 1973 the global total primary energy supply mix included hydroelectric (1.8 percent), biofuels and waste (10.5 percent), and wind and solar (0.1 percent). Today, after billions of dollars of government and private spending and even with technological breakthroughs, the mix is hydroelectric at 2.5 percent, biofuels and waste at 9.8 percent, and wind and solar at 1.7 percent.
The time for inaction is over. The government must plan, implement and enforce environmentally sound mining policies. Otherwise, no one gets to complain about the negative economic effects if and when crude oil goes to $100 or more per barrel.