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THE
sharp rise in oil prices has placed subsidies at the
center of the agenda, particularly in developing
markets, Neil Atkinson, senior consultant of KBC Market
Services, said Thursday.
“With
the high price of oil, the cost of subsidies is now very
significant,” he told attendees of the 2008 Philippine
Energy Summit, raising the question of whether giving
out subsidies is sustainable, and what reform or
abolition would achieve.
Atkinson, an energy specialist, talked about the current
state of the world oil market. He is affiliated with KBC
Market Services, a global energy economics consulting
firm based in
London.
Atkinson
noted that Sinopec and, to a lesser extent, Petro-China
have lowered their allocation for subsidies to $685
million in 2006 from $1.37 billion in 2007.
He said
subsidies accounted for 2.9 percent of China’s budget
expenditure in 2006 owing to negative refinery margins
that prompted crude run cuts and resulting in fuel
shortages, leading in turn to higher and expensive fuel
imports.
Atkinson
said that oil demand, particularly in developing
markets, is expected to grow further until 2030.
For the
Philippines alone, Atkinson said oil demand is expected
to grow to 350 barrels per day (bpd), 394 bpd and 478
bpd in 2010, 2020, and 2030, respectively.
Atkinson
said social policy objectives can be met more
efficiently without subsidies, but some also mistakenly
view no subsidy as an abandonment of objectives.
“A
social security system targeted at poorer sections of
society is more cost-effective than subsidies. Why
should middle- and upper-level earners enjoy cheap
fuel?” argued Atkinson.
He said
poor people often don’t have access to personal
transport, and thus benefit less from fuel subsidies.
This is the same point raised by the Executive in
rejecting calls among some lawmakers to lift the
value-added taxes on oil: only a fraction of people will
benefit, the Executive said, unlike with diesel
discounts that go direct to public transport that
majority of people patronize.
Subsidies, according to Atkinson, promote indiscriminate
growth and pollution and carbon dioxide emissions.
Meanwhile, the Bagong Alyansang Makabayan (Bayan) said
the oil companies and the government are misleading
people with the announced one-peso-per-liter rollback in
the pump prices of diesel.
Bayan
said the rollback is a public relations ploy by the
Department of Energy (DOE) and the oil companies that
insults a public burdened with high oil prices.
Bayan
noted the suspicious timing of the rollback with the
opening of the Energy Summit, apparently to make people
believe the government is responding to the clamor to
reduce oil prices.
In
reality, Bayan argued, the one-peso-per-liter rollback
only offsets a small portion of the oil price hikes
implemented by the oil firms in the past months.
The
group said the move, a result of the oil tariff cut
ordered by the government, lowered the pump price of
diesel only while the prices of other petroleum products
commonly used for livelihood and daily household
consumption like gasoline, kerosene and LPG, remain
unchanged. |
