No quick fix for pricey oil

My kids in California tell me gasoline is now retailed at over $3 a gallon. That translates to about 79 cents a liter (1 US gallon = 3.78 liters). At P51 to the dollar, that’s about P40.29 a liter or just about what it costs here. Reading the blogs and the weekend articles in the major American papers, it seems that the Americans are up in arms. Those on the lower end of the socio-economic scale, including college kids on allowance, have been forced to introduce lifestyle changes. The worst is still to come.

Yet, as The Economist observed, the current price of gasoline in the US "seems laughably cheap to most Europeans". When I was in Germany about this time last year, the price of gasoline was the equivalent of P80 a liter. According to The Boston Globe, Britain’s AA Motoring Trust estimates drivers in 11 European countries are now paying an average of more than $6 a gallon, double what Americans are shocked to pay now.

In August last year, gasoline already cost the equivalent of $7.13 a gallon in Amsterdam (or about P98/liter), according to an article in the Christian Science Monitor. ‘’We have always looked upon you Americans with a lot of envy" about gas prices, said David Williams of The Trust, an independent research group that advocates for British motorists.

We have to wake up to the reality that there is no quick fix for us in the matter of pricey oil. We should have acted generations ago… we should have taken the oil crisis of the 80s as a wake up call. "Societies adjust over decades to higher fuel prices," Jos Dings, head of Transport and Energy, a coalition of European environmental NGOs, told the Christian Science Monitor. "They find many mechanisms."

Unfortunately, like the Americans, we have this general feeling that we have a God-given right to cheap oil and that the oil wells will never run dry. We have built our lives around this wrong assumption through the years and it is not possible to reverse gears quickly enough to avoid pain. The worse thing for us is, we may end up not having enough foreign exchange to pay for our oil imports as this upward trend in oil prices continues.

Perhaps, we should look to Europe for a vision of the future of oil. We can learn from the Europeans and prepare ourselves for this future, a time when oil will neither be plentiful nor cheap. How have the Europeans coped?

Chief among them, according to experts interviewed by the Monitor, is the habit of driving smaller and more fuel-efficient cars. European per capita consumption of gas and diesel stood at 286 liters a year in 2001, compared to 1,624 in the US, according to IEA figures. During the energy crisis of the 80s, we totally banned the entry of gas guzzlers. We should do that again.

"European consumers are very sensitive to fuel economy and sophisticated about engine options," Lew Fulton, a transport analyst with the United Nations Environment Program (UNEP) told the Monitor. "European car magazines are full of comparisons of fuel costs over the life of a vehicle."

The single most effective measure that has brought down motorists’ fuel use in Europe is taxation. European governments have long used gasoline taxes not only as an important source of revenue, but also as a policy tool to drive down oil consumption and reduce pollution. Taxes account for about 66 percent of the pump price in Britain – so, of this month’s average price per gallon of $6.40, about $4.22 goes to the government. However, the French government has promised tax rebates this year to taxi drivers, truckers, fishermen, and others who depend heavily on gasoline.

"There is really good evidence that higher prices reduce traffic," says Stephen Glaister, a professor of transportation at London’s Imperial College. "If fuel prices go up 10 percent... fuel consumed goes down by about seven percent, as people start to use fuel more efficiently, not accelerating so aggressively and switching to more fuel-efficient cars. It does change people’s behavior."

It is amusing as much as it is frustrating to watch politicians, here and in America, grasping at straws trying to look like they are doing something about the spike in oil prices. Yet, there is no silver bullet, contrary to what some people might want to make us believe.

As New York Times columnist Tomas Friedman observed, the test of leadership is for President Bush (and our Ate Glue) to tell the people the truth. And the truth is, "this is not your parents’ energy crisis. The price of oil is not soaring just because of greedy oil companies. It is soaring because of structural changes in the global energy market that could have vast consequences for America and the world if we do not respond in a comprehensive manner."

The high oil price, as The Economist summarized it, is a result of old-fashioned demand and supply. China’s oil-hungry growth continues apace and America’s demand continues unabated. At the same time supplies are threatened by continued violence in Iraq, an American threat to attack Iran over its nuclear ambitions, leftist nationalism in Latin America, instability in Nigeria and more. Many experts think $10-$15 of the current price of oil is due to geopolitical worries. No amount of blaming oil company greed, even if true, is going to affect the going price.

Friedman’s prescriptions: a tax on gasoline at the pump that will keep prices around $4 a gallon (still less than most Europeans pay); a tax on vehicles that will make gas guzzlers (like those Expeditions) prohibitively costly and hybrids and smaller cars enormously attractive; mandate that every car sold would not just have seat belts, but would also be flex-fuel capable (as in Brazil) so it could run on ethanol, methanol or gasoline; pave the way for the rapid commercialization of plug-in hybrid vehicles, which would combine electricity and gasoline to get 100 miles out of every gallon of gasoline consumed.

On the positive side, consumers are starting to be creative in trying to deal with high oil prices. Maria Bartiromo interviewed a graphics artist of the Wall Street Journal who is collecting used cooking oil from New York restaurants, filtering it and using it to power his diesel car. CNN showed other motorists in California using soy bean cooking oil from Costco to fuel their old diesel Mercedes Benzes. At a little over $2 a liter when bought in bulk, it now makes sense to use the soya oil meant for cooking to power their cars.

Instead of complaining and striking, jeepney drivers’ associations here could ask government for technical and financial support to similarly convert their diesel jeepneys to burn used cooking oil the way the WSJournal artist is presently doing. Or, support the local coconut industry by using pure coconut oil to power public transport. The Wall Street Journal TV show and CNN’s report indicate that the technology is now available. Also, we have enough people with technical capability to make this happen. As the motorist using soya oil told CNN, the money stays in the country 100 percent.

Still, there is no getting away from Friedman’s most urgent recommended measure, even if it is also the most painful and politically unpalatable. "The sooner and the more we take the price of gasoline up – and keep it there - the sooner we can bring it down forever. If we want to make wind, solar and biomass more competitive, gasoline has to cost more, not less." In this sense, that two-percent tariff cut on oil imports Ate Glue resorted to in response to the $75 per barrel of oil, looks like a panic reaction that will do nothing much for consumers… and may even hurt in the long term.

It is a harsh reality. I dread the impact on my lifestyle that European level gasoline prices will bring. But do we have a choice? Of course we do. We just have to be creative and determined to overcome this energy crisis. Doing nothing other than complaining, going on strike not only hurts us now, it can also mean a bleak future. The earlier we take steps to address it, painful as it is, the better off the lives of our children and grandchildren will be.

Foreign exchange

Here’s Dr. Ernie E.

A woman taught sex education in the South Bronx, and as a sixth grade teacher she was told to answer all their sex questions.

One kid asked, "Is there any part of the woman’s body known as the Volvo?" which she thought was a good question.

She said, "Only on Swedish women."

Boo Chanco’s e-mail address is [email protected]