Global gas prices threaten livelihoods and stability

“NOT ENOUGH” — It’s not enough. It was the message protest leaders in Ecuador delivered to the country’s president last week after he said he would cut the price of regular gasoline and diesel by 10 cents in response to rioting protests over soaring fuel prices fuel and food.

The fury and fear of energy prices that have exploded in Ecuador are playing out around the world. In the United States, average gasoline prices, which have jumped to $5 a gallon, are weighing on consumers and imposing an excruciating political calculation on President Biden ahead of the midterm congressional elections this fall.

But in many places the spike in fuel prices has been much more dramatic and the resulting misery much more acute.

Families worry about how to keep the lights on, fill the car’s gas tank, heat their homes and cook. Businesses are grappling with rising transit and operating costs and demands for wage increases from their workers.

In Nigeria, stylists use light from their mobile phones to cut hair because they cannot find affordable fuel for the gasoline generator. In Britain, it costs $125 to fill the tank of an average family car. Hungary prohibits motorists from buying more than 50 liters of gasoline per day at most gas stations. Last Tuesday, Ghanaian police fired tear gas and rubber bullets at demonstrators protesting economic hardship caused by rising gas prices, inflation and a new tax on electronic payments.

Skyrocketing fuel prices have the potential to rewire economic, political and social relations around the world. High energy costs have a cascading effect, fueling inflation, forcing central banks to raise interest rates, stunting economic growth and hampering efforts to combat devastating climate change.

Russia’s invasion of Ukraine, the largest exporter of oil and gas to world markets, and subsequent retaliatory sanctions have sent oil and gas prices skyrocketing with staggering ferocity. The unfolding calamity comes on top of two years of upheaval caused by the Covid-19 pandemic, intermittent shutdowns and supply chain grunts.

Soaring energy prices were one of the main reasons the World Bank revised its economic forecast last month, estimating that global growth will slow even more than expected, to 2.9% this year, or about half of what it was in 2021. The bank’s chairman, David Malpass, warned that “for many countries, recession will be hard to avoid.”

In Europe, an overreliance on Russian oil and natural gas has made the continent particularly vulnerable to high prices and shortages. In recent weeks, Russia has reduced its gas deliveries to several European countries.

Across the continent, countries are preparing emergency rationing plans that involve caps on sales, reduced speed limits and lowered thermostats.

As is usually the case in crises, the poorest and most vulnerable will feel the harshest effects. The International Energy Agency warned last month that rising energy prices mean that 90 million more people in Asia and Africa lack access to electricity.

Expensive energy radiates pain, contributes to rising food prices, lowers living standards and puts millions of people at risk of hunger. Higher transportation costs raise the price of every item transported, shipped or flown, whether it’s a shoe, cell phone, soccer ball or prescription drug .

“The simultaneous rise in energy and food prices is a double punch in the guts of the poor in virtually every country,” said Eswar Prasad, an economist at Cornell University, “and could have far-reaching consequences. devastating in some parts of the world if it persists for an extended period.

In many places, livelihoods are already disrupted.

Dione Dayola, 49, leads a consortium of around 100 drivers who criss-cross metro Manila picking up passengers from minibuses known as jeepneys. Today, only 32 of those drivers are on the road. The others left to look for other jobs or turned to begging.

Before pump prices started to rise, Mr. Dayola said, he was bringing in about $15 a day. Now it’s $4. “How do you plan to live off this? ” he said.

To supplement the family income, Mr. Dayola’s wife, Marichu, sells food and other items in the streets, he said, while his two sons sometimes wake up at dawn and pass by. about 15 hours a day in their jeepneys, hoping to earn more than them. spend.

The Philippines buys only a tiny amount of oil from Russia. But the reality is that it doesn’t matter who you buy your oil from — the price is set on the world market. Everyone is bidding against everyone, and no country is isolated, including the United States, the world’s second largest oil producer after Saudi Arabia.

Persistently expensive energy is stoking political discontent not only in places where war in Ukraine seems remote or irrelevant, but also in countries leading opposition to the Russian invasion.

Last month, Mr. Biden proposed suspending the tiny federal gasoline tax to reduce the gas sting to $5 a gallon. And Mr Biden and other Group of 7 leaders discussed a price cap on exported Russian oil last week, a move that aims to ease the burden of painful inflation on consumers and reduce revenue. export that President Vladimir V. Putin is using to wage war.

Price hikes are everywhere. In Laos, gas now costs more than $7 a gallon, according to GlobalPetrolPrices.com; in New Zealand it’s over $8; in Denmark it is more than $9; and in Hong Kong, it’s over $10 for each gallon.

The leaders of three French energy companies have called for an “immediate, collective and massive” effort to reduce the country’s energy consumption, saying the combination of shortages and soaring prices could threaten “social cohesion” in winter next.

In the poorest countries, the threat is greater as governments are torn between offering additional public aid, which requires taking on heavy debt, and facing serious unrest.

In Ecuador, government gas subsidies were instituted in the 1970s, and whenever the authorities tried to repeal them, there was a backlash.

The government spends about $3 billion a year to freeze the price of regular gasoline at $2.55 and the price of diesel at $1.90 per gallon.

On June 26, President Guillermo Lasso proposed to reduce these prices by 10 cents each, but the powerful Ecuadorian Confederation of Indigenous Nationalities, which led two weeks of protests, rejected the plan and demanded reductions of 40 and 45 cents. . On Thursday, the government agreed to cut each price by 15 cents and the protests died down.

“We are poor and we cannot afford university,” said María Yanmitaxi, 40, who traveled from a village near the Cotopaxi volcano to the capital Quito, where the Central State University is used for shelter hundreds of demonstrators. “Tractors need fuel,” she said. “Peasants must be paid.”

Gas subsidies, which amount to almost 2% of the country’s gross national product, are starving other sectors of the economy, according to economic analyst Andrés Albuja. Spending on health and education was recently cut by $1.8 billion to ensure repayment of the country’s large debt.

Mexico’s President, Andrés Manuel López Obrador, uses the money the country makes from the crude oil it produces to help subsidize gas prices in the domestic market. But analysts warn that the revenue the government gets from oil cannot make up for the money it is losing by temporarily removing gasoline taxes and giving an extra subsidy to companies that run gas stations.

In Nigeria, where public education and health care are in a sorry state and the state cannot provide its citizens with electricity or basic security, many people believe that the fuel subsidy is the only thing the government does for them.

Kola Salami, owner of unisex salon Valentino on the outskirts of Lagos, had to hunt for affordable fuel for the gas generator he needs to run his business. “If they stop subsidizing it,” he said, I don’t even think we can. …” His voice trailed off.

In South Africa, one of the most economically unequal countries in the world, rising fuel prices have created an additional rift.

As President Cyril Ramaphosa campaigns for re-election at the ruling African National Congress conference in December, even traditional party allies have seized on the cost of fuel as a failure of political leadership.

In June, after fuel hit a record over $6 a gallon, the South African Trades Union Congress marched in Durban, a city already devastated by violence and looting last year, and flooding this year. Rising fuel prices have been “devastating”, said union spokesman Sizwe Pamla.

Spiraling gas and oil prices have spurred more investment in renewable energy sources such as wind, solar and low-emission hydrogen. But if clean energy benefits from increased investment, so does fossil fuel.

Last month, Chinese Premier Li Keqiang called for an increase in coal production to avoid power outages during a scorching heat wave in the north and center of the country and a subsequent increase in demand for coal. air conditioner.

Meanwhile, in Germany, coal-fired power plants that were due to be taken out of service are being reignited to divert gas to storage reserves for the winter.

There is little relief in sight. “We will still see high and volatile energy prices in the years to come,” said Fatih Birol, executive director of the International Energy Agency.

At this point, the only scenario in which fuel prices fall, Birol said, is a global recession.

The report was provided by Jose Maria Leon Cabrera from Ecuador, Lynsey Chutel from South Africa, Ben Ezeamalu from Nigeria, Jason Gutierrez from the Philippines, Oscar Lopez from Mexico and Ruth Maclean from Senegal.

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