Inevitable oil price hike: Any cushion?
FULL DISCLOSURE - Fidel O. Abalos () - April 20, 2009 - 12:00am

Few weeks from now, if not attended to, the country will usher in another distasteful sight that may be viewed before a nationwide audience - the left-leaning organizations’ way of solving problems. As usual, on primetime, we could be witnesses of these thugs’ hooliganism and their penchant of destroying others’ legitimately built properties, more particularly, those owned by giant oil retailers. Condemning them no end and tagging them as the ruthless perpetrators of all our miseries. 

Apparently infiltrated by ideologues, jeepney operators’ and drivers organizations will certainly join the call. They will again stop plying their routes to the inconvenience of the general public.

Obviously, they will use their (ideologues) mastery of blowing peoples’ pent-up sentiment into wild and uncontrollable emotions. Though hollow to most of us, their misinformed flock will surely take their rhetoric as gospel truth. All these misguided statements and seemingly libelous invectives stemming from a singular root of perceived and felt miseries - the inevitable increase in oil prices. As usual, with the hope of gaining immense popularity, these left-leaning cause-oriented groups will try to make it a political issue. 

Again, as always, we wish to emphasize that oil prices are no political issues and, therefore, rallies and demonstrations will never solve this potential problem. These will only worsen it. In fact, unless the government can prove that these retailers are forming a cartel, or are trying to manipulate the supply chain and the prices, they can’t do anything about it. The interaction between global demand and supply determines the oil prices.

Notably, just last Thursday, April 16, oil moved higher towards $50 (it settled at US$49.98) a barrel. Though minimal, such upward swing was attributed to encouraging news that not only that the United States of America (USA) is showing signs of recovery but China as well. Knowing fully well that these are the two largest oil consuming countries in the world, the commodity’s price index moved cautiously upwards. Coupled with the steadily increasing production cuts by the Organization of Petroleum Exporting Countries (OPEC), the market prices will certainly go up towards the end of the year.

Honestly, nobody will wish for it (oil price hike), not even the country’s giant retailers since high prices will require more capital. Unfortunately, like an amputee’s ubiquitous cane, it will be a permanent fixture in our daily routine. It is simply unavoidable. While its truest impact isn’t fully felt with a seemingly stronger peso, very soon it might slowly sap whatever is left in one’s pocket with our currency slowly sliding beyond P49.00 to a US$.

With oil prices expected to hover between US$55.00 and US$75.00 per barrel, pundits and wannabes will surely present several prescriptions on how to cushion the impact of this seemingly irreversible price surge. As election nears, the most understandable and catchy option presidential wannabes will certainly use as launching pad shall be, as usual, the suspension of the 12% VAT on oil.      

Just like last year, Senator and Presidential wannabe Mar Roxas will potentially lead the charge to suspend VAT on oil. Influential labor unions and big transport groups will certainly join him in this crusade. Despite its seeming relevance, however, this will surely solicit a lot of debates, altercations and disagreements. The legislative and executive departments will surely be locking horns in muscling their way into what they feel is best for the country and for them, personally and politically.

 Undeniably, there is a huge revenue implication if the VAT on oil shall be suspended. The annual tax revenue generated out of this imposition is a staggering P70 billion. This is a big chunk of the total government revenue.   Considering that the government is way off revenue targets, this potential cushion may just gather nothing but dust. 

However, before oil prices run wild, we must consider permanent solutions. There are many permanent solutions available (like nuclear power) and have been successfully tapped by a handful of highly developed nations. In fact, some extremely environmentally conscious countries have used nuclear power. Why not consider this option as well, provided, safety measures are in place and are continuously and closely monitored. 

In considering our own oil exploration along Tañon Strait, it is noteworthy that even the USA is strongly taking steps in lifting an executive ban on offshore drilling. This is a very serious move considering the fact that a succession of presidents, from Bush's father — George H.W. Bush — to Bill Clinton, have sided against drilling in these waters, as has Congress each year for 27 years. 

But last year, then President Bush and the majority of the Americans favored the lifting of an executive ban on offshore drilling. Though it will need confirmation from congress, at least, he (Bush) made it clear that this could be a lasting solution. 

With these developments, just like the USA, it has become mandatory for our government and the environmentally concerned citizens to gather themselves in a conference table to thresh out whatever issues that need to be addressed for the development of the potential oil reserves along Tañon Strait and other Department of Energy identified areas for exploration. If an environmentally conscious USA is willing to develop its oil reserves and make it as one permanent solution to its apparent lack of it, then why can’t we Filipinos or, should I say Cebuanos do it.

Indeed, options in solving this crisis are infinite and the possibilities are endless. However, it is quite disappointing that our government leaders are never serious in evaluating them. Instead, they are spending more time analyzing ways to earn political mileage and in mapping out winning strategies in next year’s elections.

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