Changing lifestyles

[Ramon Ignacio]

Here's an article written by my former professor at Ateneo GSB Rene Azurin

STRATEGIC PERSPECTIVE
René B. Azurin


Changing lifestyles


Don’t look now but our lifestyles are changing. At $200 per barrel of oil, regular unleaded gasoline will be P90 per liter and LPG for cooking will be P990 per 11-kg cylinder. (These figures come from a pricing model developed by Energy Consultant Marcial Ocampo.) At those prices, I will have to shelve plans to tour the country by car –visiting long unseen relatives from Aparri to Davao – and acquire a taste for uncooked fish dipped in Silver Swan soy sauce. (Kikkoman will be too expensive.)

The march toward $200 per barrel oil seems inexorable and trends indicate that it will be here in a short thirteen months. Some oil industry observers have been attributing the skyrocketing oil prices to speculative activity and are suggesting that this speculative “bubble” will burst soon and oil prices will fall to a more “normal” level of $80 to $110 per barrel. Well, this bursting is not likely to happen anytime soon if we are to believe the president of OPEC, the Organization of Petroleum Exporting Countries, when he said the other day that oil prices should rise to “between $150 and $170 a barrel” by summer this year. That means August or September, the European summer.

Personally, I think whatever flurry of activity now being seen in commodity markets is based on the sudden, somewhat delayed realization by traders that fundamental changes are taking place in the oil demand-supply picture, prompting them to scramble to adjust their oil positions for the future. I think global oil production has more or less plateaued while world oil demand cannot help but continue to rise. It should be pointed out that the per capita consumptions of energy in developing countries are still ridiculously low in comparison with the rich industrialized countries. The imperative of raising the living standards of very large groups of people in the developing world to acceptable levels will obviously exert enormous pressure on available energy supplies and this pressure cannot be expected to be relieved for quite some time.

In any event, the era of cheap oil is – we better believe it – gone forever. That means that you might not be able to give away your gas-gulping SUV in the used vehicle market. That means that those of us who still own cars will have to take them off the road and rediscover the communal joys of public transportation. That means that working from home will now become the norm and the main office space inhabited mainly by racks of remote-access servers will become the general case rather than the exceptional one. That means that, instead of lunch or dinner meetings with friends and business associates, we will have to make do with video conversations via Skype or Yahoo messenger. That means that we will have to forego traveling for pleasure and be content with watching the National Geographic channel. That means that, in the end, we will have to consume less and make what we use last longer.

There’s a bright side to this: development of the cleaner, more climate-friendly sources of energy that environmentally- conscious consumers have long wanted is going to finally become profitable for investors. The Philippine Energy Summit last January in fact identified the development of renewable and alternative sources of energy as an absolutely essential component of what must be the country’s logical response to rising oil prices. Thankfully, legislators – even if the huge transportation and travel allowances they pay themselves are paid for by us – seem finally set to pass “An Act Promoting the Development, Utilization, and Commercialization of Renewable Energy Resources.” Its avowed objects are to “accelerate the exploration and development of renewable energy resources such as biomass, solar, wind, hydro, and ocean energy” and to “increase the utilization of renewable energy by institutionalizing the development of national and local capabilities in the use of renewable energy systems and promoting its efficient and cost-effective commercial application.” Great. It’s about time. Let us hope that these easily distracted legislators do not find their attention drawn elsewhere before they vote on this.

Still, new renewable energy options will require two to five years to implement and we need to cope with escalating energy costs now. At $200 per barrel oil, annual inflation is estimated by the University of the Philippines- based Institute for Development and Econometric Analysis Inc. (headed by Dr. Cayetano Paderanga) to hit 14.6% as a result of the oil price’s combined impact on both basic consumer products and the peso-dollar exchange rate. That, I fear, may even be optimistic. Today, according to the Bangko Sentral ng Pilipinas, the year-on-year inflation rate is already at 11.2%, which is a 14-year high, and oil is only at $143 per barrel.

Realistically, the only thing we can really do at the moment in the face of high oil prices is to cut down on our use of energy and make our consumption of it more efficient. In that connection, participants at the Energy Summit urged also the immediate enactment of a comprehensive Energy Conservation Act that would provide incentives for energy conservation activities. That law would “encourage the development of energy efficient technologies” and “remove barriers to the effective promotion of efficiency initiatives in the energy market sector.”

Even without such a law, however, a multi-sector task force for energy conservation has already been mobilized by Energy Secretary Angelo Reyes to flesh out and implement the nuts and bolts of a national energy efficiency and conservation plan. That plan includes, for example, the total replacement of the 68 million incandescent bulbs now in use in the country with energy-efficient compact fluorescent lamps, the development of energy-efficient standard labeling for all industrial equipment and home appliances, the implementation of a major retrofitting program for local government units, commercial establishments, and industrial firms, the building of more and better mass transport systems for moving people and goods, and the provision of funding support for energy efficiency and conservation projects. We should all support these initiatives.

But, whatever, changes in the way we live can no longer be avoided. We must brace ourselves for new realities. I only hope I won’t have to start biking to my classes in Diliman. I really don’t have the energy for that.