www.soriano-ph.com

LINK: ‘Note Verbale‘, Manila Times (Sunday-Career Section) - 11 November 2007 Issue

In 1757, they say that Russian scientist Mikhail Vasilyevich Lomonosov is the first to introduce the “biogenic theory”, which holds that fossil or mineral fuels come from fossilized remains of dead plants and animals which through compression, heating and breakdown of bacteria over a long period of geological time produce crude oil and natural gas. 

They say that at least 86 percent of human-produced energy comes from burning fossil fuels, which unfortunately are non-renewable because it takes millions of years to form them and the global reserves are being consumed much faster than the reserves that Mother Nature are supposed to create.

This week prices of oil escalated to as high as above $98 per barrel raising serious concerns about its impact to problematic economies especially in countries like the Philippines which is highly dependent on imported fuel.

Experts say that this record high increases in oil prices are largely attributable to the peaking global demand and the concomitant permanent decline in production of oil-producing nations, not to mention the depreciating value of the US dollar, the continuing American occupation of Iraq that holds the third largest oil reserves in the world, the political tensions in the Middle East, and the approaching winter in the Northern Hemisphere.
 
It is uncertain whether the trend would remain over time or simply a temporary condition.

This twin global malady of oil supply scarcity and price surge would certainly impose a deeper travail of difficulty in the economic life of the Filipino people. It is not as if these concerns are recent.

For more than three decades, each and every political regime of this country has been talking about plans to develop and promote alternative energy sources ranging from nuclear power, geothermal and renewable energy sources, and more recently, bio-fuel.

The last thirty years would have been enough to address the country’s energy supply chain. But the Bataan nuclear power plant is mothballed. Nothing substantial was heard after President Gloria Macapagal Arroyo inaugurated the “Malampaya Deep Water Gas-to-Power Project” in October 2001. It is hoped that the 2006 Biofuels Act would not suffer the same fate of apparent oblivion.

The good news, government says, is that the peso exchange rate is getting stronger vis-à-vis the US dollars. But the impact of this improving peso is hardly felt, or maybe would never be felt, by Juan de la Cruz given the adverse economic effects of higher energy and power costs.

The average peso-dollar exchange rate for October 2007 is P44.380 to a US dollar, or approximately 21 percent decline from the highest posted in October 2004 at P56.341. On the other hand, the $98 per barrel just right after the close of last month represents an increase of approximately 77 percent compared to the October 2004 international market price of $55.15 per barrel.

Given these figures that portray the current rate of depreciation of global oil price increase still carrying a net impact of 56 percent as against peso exchange rate appreciation, it would be mathematically difficult for the government to rest on its laurels on the improving exchange rate to resolve the country’s worsening economic condition. Noteworthy of consideration in the equation is the fact that the exchange earnings of overseas workers, which have been fueling consumption spending and keeping the country’s economy afloat for decades, are also depreciating.

As Tom Kloza of the Oil Price Information Service told “The Early Show” of CBS, “I don’t think it’s a question of whether we hit $100. It’s a question of how much time we might spend there”.

There is certainly a good sense to address the oil price issue but there is more urgency for a committed effort and leadership to tackle the country’s energy supply chain.

Some political observers note that the country may not see the day when corruption and poverty is finally over because they are the same perennial problems that drive unscrupulous politicians to remain in power.

Similarly, the country’s energy woes have been recurrent, hopefully, not for the same reason.