“Is not sufficient”. That was the message that the leaders of the protests in Ecuador gave the country’s president last week, following he announced that he would lower the price of regular gasoline and diesel by 10 cents due to the massive protests over the increase in prices. fuel and food prices.
The anger and fear generated by the skyrocketing energy prices in Ecuador is a phenomenon experienced throughout the world. In the United States, average gasoline prices, which have jumped to the $5-per-gallon level, are overwhelming consumers and have become a difficult political crossroads for President Biden ahead of midterm elections this fall.
But, in many places, the increase in fuel costs has been much more dramatic, and the misery it creates is much more critical.
Families worry regarding how to keep their lights on, fill their cars with gas, heat their homes, and cook their meals. Companies grapple with rising operating and transit costs and demands for wage increases from their workers.
In Nigeria, stylists use the light from their cell phones to cut hair because they can’t find affordable fuel to run gasoline generators. In the UK, it costs $125 to fill the tank of an average family car. Hungary prohibits motorists from buying more than 50 liters of gasoline a day at most service stations.
Last Tuesday, Ghanaian police fired tear gas and rubber bullets at demonstrators protesting once morest economic hardship caused by rising gasoline prices, inflation and a new tax on electronic payments.
The staggering rise in fuel prices has the potential to reshape economic, political, and social relations around the world. High energy costs have a cascading effect, driving inflation, forcing central banks to raise interest rates, slowing economic growth and hampering efforts to combat severe climate change.
The invasion of Ukraine by Russia, the largest exporter of oil and gas to world markets, and the retaliatory sanctions that followed have caused oil and gas prices to skyrocket with staggering ferocity. This calamity comes on top of two years of turmoil caused by the Covid-19 pandemic, intermittent closures and supply chain issues.
The rise in energy prices was one of the main reasons why the World Bank revised its economic forecast last month and estimated that global growth will slow even more than expected, reaching 2.9 percent this year. , regarding half of what it was in 2021. The bank’s president, David Malpass, warned that “for many countries, it will be difficult to avoid recession.”
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 been cutting gas deliveries to several European countries.
Across the continent, countries are preparing plans for emergency rationing that involve sales caps, reduced speed limits and lower thermostats.
As is often the case with crises, the poorest and most vulnerable will bear the brunt of the effects. The International Energy Agency warned last month that higher energy prices have meant an additional 90 million people in Asia and Africa have no access to electricity.
Expensive energy contributes to high food prices, lowers living standards and exposes millions of people to hunger. Rising transportation costs increase the price of every item that is transported, shipped, or flown, whether it be a shoe, a cell phone, a soccer ball, or a prescription drug.
“The simultaneous rise in energy and food prices is a double whammy in the stomach for the poor in virtually every country,” said Eswar Prasad, an economist at Cornell University, “and might have devastating consequences in some places. of the world if it persists for a prolonged period.
In many places, livelihoods are already being disrupted.
Dione Dayola, who drives a passenger jeep in metro Manila, said the price of gasoline had cut her daily earnings from $15 to $4. “How can you live with that?” she said.
Dione Dayola, 49, leads a consortium of regarding 100 drivers who crisscross the Manila metro area picking up passengers in minibuses known as jeepneys or jeepneys. Now only 32 of those drivers are working. The rest have left to look for other jobs or have chosen to beg.
According to Dayola, before prices started to rise, he was earning regarding $15 a day. Now, that sum has been reduced to four dollars. “How can you live with that?” he asked.
To add to the family income, Dayola’s wife, Marichu, sells food and other items on the streets, while their two sons sometimes wake up at dawn and spend regarding 15 hours a day in their jeeps, hoping to earn more. of what they spend.
The Philippines only buys a small amount of oil from Russia. But the reality is that it doesn’t matter who you buy oil from: the price is set in the global market. Everyone is bidding once morest everyone and no country is isolated, including the United States, the world’s second largest oil producer following Saudi Arabia.
Persistently, expensive energy is fueling political unrest not only in places where the war in Ukraine feels remote or irrelevant, but also in countries leading opposition to Russia’s invasion.
Last month, Biden proposed suspending the small federal gas tax to lower the gas price hike to $5 a gallon.
Last week, Biden and other leaders of the Group of 7 discussed a maximum price for exported Russian oil, a measure that is aimed at easing the burden of painful inflation on consumers and reducing export earnings that President Vladimir Putin is using to wage war.
Price increases are everywhere. In Laos, gasoline now costs more than $7 a gallon, according to GlobalPetrolPrices.com; in New Zealand, it is more than 8; in Denmark it exceeds 9 dollars; and in Hong Kong, it costs more than 10 per 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 rising prices might threaten “social cohesion” during the coming winter.
Mexico is using the money it makes from the crude it produces to subsidize gasoline prices.
In poorer countries, the threat is more critical as governments are torn between offering additional public assistance, which requires taking on heavy debt, and facing serious unrest.
In Ecuador, government subsidies on gasoline were instituted in the 1970s, and every time officials have tried to repeal them, it triggers a backlash.
The government spends approximately $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 lower each of those prices by 10 cents, but the powerful Confederation of Indigenous Nationalities of Ecuador, which has been protesting for two weeks, 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 subsided.
“We are poor and we cannot afford university,” said María Yanmitaxi, 40, who traveled from a town near the Cotopaxi volcano to Quito, the capital, where the Central University of Ecuador is being used to house hundreds of protesters. . “Tractors need fuel,” she said. “Peasants need to be paid.”
Gas subsidies, amounting to nearly 2 percent of the country’s gross national product, are critically affecting other sectors of the economy, according to Andrés Albuja, an economic analyst. Spending on health and education was recently cut by $1.8 billion to secure the country’s large debt payments.
Businesses in Mexico City have struggled with natural gas prices, which have soared even as the government has implemented subsidies to ease gasoline hikes.
Mexican President Andrés Manuel López Obrador is using the money the country makes from the crude it produces to help subsidize domestic gas prices.
But analysts warn that the revenue the government gets from oil cannot make up for the money it is losing by temporarily removing taxes on gasoline and giving an additional subsidy to companies that operate service stations.
In Nigeria, where public education and health care are in appalling condition and the state cannot guarantee its citizens some basic services like electricity or security, many people feel that the fuel subsidy is the only thing the government does for them.
Kola Salami, owner of the Valentino Unisex Salon on the outskirts of Lagos, has had to find affordable fuel for the generator he uses to run his business. “If they stop subsidizing it, I don’t think we might…” he said, unable to complete the sentence.
In South Africa, one of the most unequal countries in the world, rising fuel prices have created yet another crisis.
As President Cyril Ramaphosa campaigns for re-election at the ruling African National Congress party’s conference in December, even the party’s traditional allies see the cost of fuel as yet another failure of political leadership.
In June, following fuel broke the record price of $6 a gallon, the South African Trades Union Congress marched through Durban, a city devastated by last year’s violence and looting, and recent flooding. High fuel prices have been “devastating”, said Sizwe Pamla, spokesman for the unions.
Spiraling oil and gas prices have spurred increased investment in renewable energy sources such as low-emission wind, solar and hydrogen. But if clean energy is getting an investment boost, so are fossil fuels.
Last month, Chinese Premier Li Keqiang called for more coal production to avoid power cuts during a scorching heat wave hitting the country’s northern and central regions, with an increase expected. in the demand for air conditioning.
Meanwhile, in Germany, coal plants that were scheduled for retirement are being restarted to divert gas to winter storage supplies.
There is little hope that this situation will improve in the near future. “We will continue to see high and volatile energy prices for years to come,” said Fatih Birol, executive director of the International Energy Agency.
According to Birol, the only scenario in which fuel prices would fall would be with a global recession.
With information from The New York Times
