Cutting reliance on imported oil

THE price of Brent crude oil has already breached the $90 per barrel mark. Reuters reported on Friday that oil prices surged to new highs and extended their rally into a seventh week. Frigid weather in the United States and the ongoing political turmoil among major world producers have put pressure on oil prices, according to the report.

The spike in oil prices has also caused fuel prices in oil-importing countries like the Philippines to rally. On Monday, oil firms announced another round of price hikes (See, “No respite so far: Oil firms raise fuel pump prices for 6th consecutive week,” in the Businessmirror, February 7, 2022). Local oil companies said the adjustment in prices reflect movements in the world oil market.

Aside from pump prices, the surge in international oil prices have also caused the price of various fertilizer grades to go up (See, “DA readies short-, long-term ways to cut fertilizer prices,” in the Businessmirror, October 25, 2021). Sugar planters lamented that the price of fertilizers—an essential input that helps boost crop yields—has nearly tripled in recent days. The jump in production cost could discourage smallholders from planting their crops, as they would only lose money.

The short-term solution is always the provision of fuel and fertilizer subsidy to farmers and fishers, who spend a chunk of their income for fuel. Countries that depend on imported oil give out these subsidies to cushion the impact of higher crude oil prices on food production. In the case of the Philippines, subsidies depend on available funds and are given out for only a short period of time.

Reducing the reliance of farmers and fishers on imported inputs should be the paramount concern of our policy-makers to shield them from oil price swings. One way by which this can be done is through a program that will allow farmers to tap renewable energy. Called the Renewable Energy Program for the Agrifishery Sector (REPAFS) 2022-2030, the initiative would require P8 billion to implement, according to the Bureau of Agricultural and Fisheries Engineering or BAFE (See, “RE program for agrifishery sector requires P8B–BAFE,” in the Businessmirror, January 10, 2022).

REPAFS seeks to increase the utilization of renewable energy (RE) systems and technologies in the farm sector. These RE systems and technologies will augment the energy supply needed in mechanization, irrigation, storage and processing facilities and other agricultural activities. Adopting renewable energy technologies will allow the Philippines to hit two goals—achieve food and energy security and reach its sustainability goals.

The amount required to implement REPAFS may be huge but it pales in comparison to the country’s net import bill in January to June 2021, which amounted to nearly $4.62 billion, or about double the $2.836 billion recorded in 2020. Apart from allocating funds for the program, policy-makers must also address the hurdles to the slow rate of adoption of RE technologies if they want REPAFS to succeed and reduce the Philippines’s reliance on imported oil.