Energy-secure PHL

By BusinessMirror Editorial - September 24, 2019
https://businessmirror.com.ph/2019/09/24/energy-secure-phl/

The drone attacks claimed by Yemen’s Houthi rebels on the world’s largest oil processing facility in Saudi Arabia and a major oil field on September 14 caused State energy producer Saudi Aramco to lose about 5.7 million barrels per day of output (See, “Oil prices post biggest jump after attack on Saudi facility,” in the BusinessMirror, September 17, 2019). The disruption caused by the drone attacks was immediately felt by the international market. When trading opened on September 16, Brent jumped more than 19 percent to $71.95 a barrel on ICE Futures Europe, its biggest gain in percentage terms since 1991.

The incident highlighted not only the vulnerability of Saudi Arabia, the world’s most important oil exporter, but also of countries that depend largely on imported oil, such as the Philippines. The country is a net importer of oil and price volatility caused by the drone attacks will have a huge impact on the economy (See, “High oil prices to ‘hurt’ slide in inflation–Neda,” in the BusinessMirror, September 19, 2019). Days after the attack, local oil firms raised pump prices and this could lead to higher fares and more expensive basic commodities (See, “Oil firms set biggest ’19 price hike; inquiry poised,” in the BusinessMirror, September 23, 2019).

Under the Philippine Energy Plan 2017-2040 prepared by the Department of Energy (DOE), the country’s total final energy consumption is expected to rise by an average of 4.3 percent annually. From 33.1 million tons of oil equivalent in 2016, the TFEC of the Philippines is expected to go up to 91 MTOE in 2040. The top energy consumers in 2016 were the transport sector, industries, and residential sectors.

In 2016, the DOE noted that the transport sector accounted for more than one third or 37.2 percent of total energy consumption. The transport sector’s total energy demand levels rose by nearly 10 percent due to the increase in the use of gasoline and diesel for road transport. Because of the robust demand for gasoline and diesel, petroleum products were the top primary energy sources in 2016.

The DOE’s projection that the transportation sector will remain as the biggest energy user in the next 25 years is hardly surprising, as the improvement in purchasing power would encourage more Filipinos to buy cars. The need to move goods to other islands, which will require boats, will also contribute to the increasing demand for petroleum products. And this would all happen against the backdrop of shrinking oil reserves and rising global prices.

Insulating the Philippines from the adverse impact of high global oil prices caused by geopolitical tensions requires a significant reduction in the consumption of petroleum products. Sans effective public transportation systems, however, this will be difficult to do. The lack of public transportation systems is also compounding the traffic situation in urban areas, which makes it more challenging for the government to cut oil consumption.

We call on the government to fast-track public transportation projects so that Filipinos, particularly in urban areas, will no longer have to drive their own cars. To reduce the country’s reliance on imported coal, the government must also make it less expensive for companies to invest in renewable-energy sources. And while consumers await these reforms, we urge the government to strictly implement a DOE directive that orders oil firms to unbundle their fuel cost to ensure reasonable and fair pricing of petroleum products.