BATU, Indonesia. Photo by Jes Aznar

Saturday, July 5, 2008

The oil problem

The poor take desperate steps to cope with rising fuel costs
By Nguon Serath, Iris Cecilia Gonzales, and Sengthong Phavasath

She used to take her daughter out on weekends or have dinner at a restaurant. But no longer. Prices for most goods and services have gone up. Which has led to street protests in Cambodia and the Philippines.

Sophat Neariroth is among 560 million people in the ASEAN region hurt by high inflation spurred by rising fuel prices - US$1.4 per liter in Cambodia. Sophat says she used to buy a kilo of pork at 8000 riel (US$2) but now she spends more than 20000riel (US$5) for a kilo of pork.

“The price of goods has drastically increased in 2008 and it is affecting my living because my salary does not increase,” says Sophat, who works for the Ministry of Agriculture.

“I have no choice but to reduce my daily expenses including travel and other unnecessary spending. Otherwise, my family cannot survive,” she adds.

We hear the same stories of hardship in Laos and the Philippines.

“The prices of goods in the markets are terribly high as last year I spent around 100,000 to 150,000 kip a day but now I spend around 200,000 to 300,000 kip daily,” complains Bouangchan Linphinith from Ventiane.

And in Manila, jeepney and tricyle drivers are compelled to extend their work hours to cope with the fuel costs, which have risen by about half since last year. Nino Baos, a 30-year old tricycle driver, now wakes up earlier than the roosters do. He now starts works two hours earlier - from five in the morning to eight in the evening just to make enough money for his wife and one-year-old son. Baos says that’s the only way he can cope with skyrocketing fuel prices.

He says that last year, he earned P300 or roughly USD7 every night. Today, he can only take home P200 or roughly USD5 despite the longer hours.

“In the past, I am able to buy more food and we would be able to eat breakfast, lunch and dinner. Now, we sometimes have to skip breakfast,” he says.

These days, Baos spends P200 for diesel per day. Diesel is among the cheaper fuel than gasoline. Prices of diesel, however, have also gone up. In the past, he would spend only P100 for diesel.

Mando Santos, a jeepney driver in Manila, faces the same problem. Last year, he needed only P800 (US$18) for gasoline for a whole day’s work. Today, he needs P1,500(US$34) for the whole day. In his 15 years of driving jeepnesy, he says today’s fuel price is the highest he has seen.

Mando takes home only P400 a day to his wife compared to P700 just last year, despite the extra hours. “Times are really tough these days,” he lamented, knowing that the situation would only get worst before it gets better.

“The problem will only make people like me poorer. I fear for the future. I hope the situation will get better next year,” he says.

Fuel prices in the Philippines last year ranged from P37 to P40 per liter . This year, the price has gone up to P59 to P62 per liter.

Kong Chandararoth, a Cambodian economist, says that ASEAN countries, except Brunei, an oil-producing country, are all affected by high oil prices. The Cambodian agriculture sector, which relies on farm machineries and fuel to operate, is badly affected as the country depends on imported oil.

Most of the goods in the markets are imported from abroad because Cambodia cannot produce such goods. The increase in oil price means higher cost for the transportation of imported products. As a result, the prices of imported goods are also severely hit by the oil crisis.

“The poor people are the most affected as they have small income which cannot cope with the higher expense in their daily life,” Chandararoth said.
He explained that it would cost more to import and export goods. The imported products and goods at the Cambodian market have increased. He said the inflation is “very high” even though there is no official figure released by the National Institute of Statistics.

He said that the government should lower the import tax and the consumption of oil in order to prevent the crisis from further hurting the people.

He also said that the government should be more open to importing the machines for the development of agriculture to lower the cost.

The oil crisis has pushed inflation up by and led to street protests in Cambodia as the country approaches its July 27 national election.

Skyrocketing Oil Price and High Inflation: Biggest Issue in Cambodian Elections

“It can be an opportunity if the people think that election can be a way to have the oil price and the goods prices reduced,” Chandararoth said.

The increases in oil prices and goods in the market have become the biggest issues in the election campaign. The opposition Sam Rainsy Party and the Human Rights Party have attacked the ruling Cambodian People’s Party for its failure to address the oil crisis and high inflation.

On the first day of the campaign on June 26, opposition leader Sam Rainsy stood on a roaming truck condemning the government for the high inflation and the sharp increase in oil prices. He told the Cambodian public that if his party wins the election, the Sam Rainsy Party would reduce the gasoline price and cut down the inflation.

“Please vote for Sam Rainsy to stop the price increase in oil and goods,” he said.

Even though the oil price has sharply increased and the people complained about this, Prime Minister Hun Sen said that it was impossible to stop the increase, as it is a global trend. He even warned the increases would continue.

Some political observers said that the crisis could give more votes to the opposition as the government has not given concrete plans to deal with the crisis.

Oil Crisis Sparks Protests in The Philippines

While the protest against skyrocketing oil price took place only half day in Cambodia in June, militant groups have been holding street protests against high oil prices roughly eight times since the start of the year.

Militants also vowed to hold a major protest on July 28 when the Philippine Congress resumes its session and more importantly, the day Philippine President Gloria Macapagal-Arroyo will deliver her State of the Nation address.

One solution militant groups want is for the government to remove the 12 per cent sales tax on oil. The tax has been blamed for high prices but the government said it would lose about P45.7 billion in revenues yearly if the tax is suspended.

Finance Undersecretary Gil Beltran said the government would instead invest the revenues from the oil tax into social services. The Finance department estimates that the tax will yield an additional P18.6 billion this year.

“We will focus on the poor. We are allowed to spend on items like these if we exceed projected revenues,” he said.

Since the start of the year, oil companies in the Philippines have increased prices 18 times. Oil firm executives say the weekly increases of P1.50 per liter (US$0.3 cents) will continue until August.

Oil Shakes Laos’ Economic Growth

Worried that the economy will not grow by eight percent as projected, Laos Prime Minister Bouasone Bouphavanh convened last month a brainstorming meeting to discuss ways to spur growth amid high oil prices.

Inflation rate in Laos has jumped from 6.0 cent in February to 10 per cent in May. The government said early this year the inflation rate would be kept under 10 percent.

“The current 10 per cent would be further existing until the end of the fiscal year (2007-2008),” said Vice President of the National Economic Research Institute, Dr. Leeber Leebouapao.

However, analysts said inflation could be between 10 to 11 percent this year.

The Lao government has adjusted oil prices upwards nine times and only once, downwards. The oil crisis has indeed affected the region and its citizens are hoping that price increases would soon abate.