Energy security is essential for economic growth specially in the Philippine setting due to its dependence on imported oil. The economy is largely consumption-driven which makes it extremely vulnerable to price shocks because of the possibility of high inflation that slows down consumption and the economy consequently.
The drone attack of Saudi Arabia’s main oil producing fields by the Yemeni Houti’s again presents a threat to the Philippine economy and exposes its vulnerability to oil price spikes. An increase in oil prices immediately has an effect on the prices of basic commodities and the cost of mass transport throughout the country. In the 70s Philippine economic growth was derailed by a book-ended price hike – 1973 due to the Arab-Israeli War and in 1979 when Islamic fundamentalists overthrew the Shah of Iran. This precipitated the the economic crisis of the early 80s as a result of the Wall Street crash triggered by the same because of a US economy suffering from stagflation.
Since 1986, the energy security infrastructure established by then Minister of Energy Geronimo Velasco was dismantled. Petron was privatized along with its facilities in Limay, Bataan where storage tanks could’ve been installed to stockpile oil for refining and sale through its gasoline stations. The Ramos administration’s privatization policy came at the expense of energy security.
Exploration activities in the South China Sea also stopped. The only major investment made was when the Malampaya gas field was discovered but this is also slated to run out by 2023. LNG storage facilities are being built but this only addresses the needs of the power sector and not energy. Oil prices have been relatively stable due to the US maximizing its extraction of shale oil. It hasn’t been importing as much oil from Saudi Arabia but it still maintains its strategic petroleum reserve.
Energy security is essential for economic growth specially in the Philippine setting due to its dependence on imported oil. The economy is largely consumption-driven which makes it extremely vulnerable to price shocks because of the possibility of high inflation that slows down consumption and the economy consequently.
The Philippines should emulate the example of Singapore, an island city state that is dependent on oil imports but is energy secure because most of the major oil companies operating in the region have their refineries based in the county. The Philippines is vulnerable because of its geographic structure as an archipelago of 7,000 islands. The transport cost from the refineries to the islands are added on top of what is the sale price of gasoline and diesel fuel.
It’s an open secret that the oil players who are operating in the Philippines practice cartel-like behavior. This was contained in the World Bank report last year which listed down what’s preventing the economy from growing at a faster rate. Any movement in the major oil markets automatically translate into a price hike even if the oil companies are still holding lower priced inventory. The deregulation of the oil industry in the country has only strengthened the cartel-like behavior of industry players instead of being advantageous to the consumer.
Government is not being proactive in protecting the interests of the average Filipino taxpayer. As it goes into the sunset of its term, the Duterte Administration has lost most of its zeal. The President has been scarcely seen after the SONA. He is not all over the place as he was during the first half of his term. He should be reminded that the Philippine economy is still vulnerable and needs more institutional reforms in order to maintain its growth path.
The oil industry deregulation act must be reviewed and amended in order to put a stop to the cartels which have been created by the lack of government supervision and intervention in the oil industry.
