Powerless

The world’s energy nightmare has only just begun. The oil withheld from the global market today is twice the volume of oil held hostage by producers in previous oil crises.

The war is not about to end. On the contrary, it appears to have fallen into the escalation trap that all such misadventures are heir to. The Americans are threatening a ground war – history is not on their side.

The Houthis in Yemen have joined the war on Iran’s side. That produces the specter of a blockade at the Bab el-Mandeb Strait at the entrance to the Red Sea. This will complement the effective shutdown of the Strait of Hormuz.

The 400 million barrels of oil released from the global petroleum reserve to help stabilize prices will run out by mid-April. After that, sky’s the limit for fuel pricing.

Petron managed to bring in some Russian oil. But that is just enough to keep us supplied for five days. We have no idea, regardless of what the President says, where we will get our supply after that. Rationing is in the cards. Diesel at P200 is possible.

The Senate held a public hearing on the energy situation last week. Instead of bringing light, the event became an excuse for a circus. Sen. Loren Legarda seized the hearing as an opportunity to browbeat Energy Secretary Sharon Garin, nearly blaming her for the energy mess we now endure.

There is a reason Legarda might be hostile towards Garin. The DOE recently imposed a P24-billion penalty on Legarda’s son, Leandro Leviste, for failure to deliver on his contractual commitments. The super-franchise the young Leviste won from government is attributable to Legarda’s political influence.

Levsite’s cancelled projects should have delivered an additional 12,000 MW to the country’s energy grid. That might have alleviated our energy plight. But it was not delivered. So we need more oil and more coal to meet our energy requirements.

As part of government’s response to the looming energy crisis, the DBM released P20 billion to the DOE to fund procurement from any source. If Leviste pays the fine imposed on him, that will make for an additional P24 billion available for emergency oil procurement.

It turns out, from the evidence, that the DOE fully complied with the 45-day minimum inventory requirement set by law. There is little the agency could do beyond that. We do not have the storage facilities and refining capacity for a larger reserve.

More important, Congress has no appropriated budget for stockpiling oil. Doing so involves a massive outlay. We did not have the fiscal resources to hoard petroleum. Being a legislator, Legarda should have known the fiscal constraints.

To be sure, there are many things government should be doing. Even as we host US bases, we need to plead with the Russians and the Chinese for help with our dire energy needs. This requires close coordination with the private oil companies. Our diplomacy is wrong-footed here.

We need money to get oil in the midst of global shortage. It will help if we can collect the fine imposed on Leviste.

Food costs

The oil crisis is compounded by the looming peril of a food crisis.

Instead of investing in improving our food production, we depended on importing the food we need. This makes us doubly vulnerable. Transport costs are magnified by the shrinking value of our peso.

The same blockade that reduced oil flows also reduced fertilizer supply worldwide. This means there will be more palpable food scarcity down the road. We have to prepare for this.

The rising costs of everything makes food increasingly inaccessible for our people. The first signs of food inaccessibility will be in the form of declining nutritional intake. Before people starve, they first become malnourished.

It might be too late to rebuild our agriculture to meet the severe challenges of this time – especially serious food inflation, heightened by climate risks. But it is certainly not too late for government to take decisive steps to protect food supply while ensuring nutritional adequacy.

There are a thousand things government should have been doing: investing in logistics such as cold chains, ports and storage facilities; improving productivity through wider access to financing, technology and markets and a clear strategy to support long-term investments through the agricultural value-chain.

There are pending policy proposals that government must quickly consider. One is the Philippine Nutrient Profile Model (PNPM) that is on the table. This model proposes better regulations on marketing food to children – including front-of-pack labeling and related fiscal measures.

There has been some debate regarding the nutritional thresholds set in this model. It is possible that the model could adversely affect affordability of food supplies. Small retailers may lose cheaper, fast-moving goods. Restaurants could see fewer sourcing options or higher input costs. Ultimately, consumers will bear the added costs.

The policy is no doubt well-intentioned. But given the circumstances, this might not be the right time to add to the cost factors for food. The overriding concern at the moment is to ensure supply stability and food affordability.

The global crisis we are now experiencing expresses in broken supply chains and unpredictable trade flows. As a net food importer, our first concern should be to ensure trade is open and predictable. We cannot look too far ahead.