Buy oil with gold

By Business Mirror

The Philippines is facing some economic hardship in part due to global oil prices. We can debate what the short-term fix might be, like lowering the tax on gasoline. We can match our Asean neighbors’ methods for mitigating the effects through taxpayer-funded price subsidies.

However, no short-term solution is going to change the fact that the Philippines imports nearly all of its crude oil requirements and a large portion of its refined oil products. We might reduce our oil products imports by building refineries here at home. Yet, there is no guarantee that the cost savings would be significant. For certain products, it might even be less costly to import those produced by the existing mega-refineries in Singapore.

There is some hope that if and when the Philippines is able to tap the petroleum resources of the West Philippine Sea, this might lower the cost of crude oil for our existing and future refineries. But this is long term and because little, if any, exploratory drilling has been done in the WPS, the economic benefits are completely unknown.

Economic common sense says that if you produce your own goods, the cost should be cheaper. The farm-gate price of live hogs is about P120 per kilo. The provincial household raising a few pigs is obviously paying less for its pork on the table than a supermarket consumer in Manila.

The ‘sensible’ solution would be to raise your own pigs to lower your cost. But we know that is not at all sensible. Since the earliest close human communities, there were divisions of labor and production. The farmer grew the wheat. The baker made the bread. The poultry farmer raised chickens and someone else owned the piggery. Each required different resources from the farmer needing plenty of land to the baker knowing how to build an oven.

The Philippines may never be self-sufficient in oil any more than it will be in fresh milk, soybeans or cotton sewing thread.

The man or woman in Manila that wants to eat chicken and does not have the resources to raise his or her own must buy from the one in a rural location than does have the resources. Therefore, city dwellers must utilize their available resources-like a degree in finance to work for a bank-to make money for the purchase. The Philippines does not have oil but we do have an enormous amount of minerals. One foreign mining geologist described the island of Mindanao as ‘one big chunk of gold.’

We obviously must preserve and protect the environment. But that is the task of the government and it has been a continuous and spectacular failure. The argument that nothing can be done is simply ridiculous. Notice all those traffic signals provided by the government. Without those, traffic would be worse than it is. The government uses those for traffic management and safety. It writes laws to keep us all in line, and penalizes us if we violate the rules.

The government is able to regulate food safety, transportation safety, and licenses hospitals, schools and accountants. Of course, there are going to be malfunctions, mistakes and breakdowns.

But it is only with the mining industry that the government has no desire to even attempt to do the job it is supposed to do. Pay for foreign oil with Filipino gold, copper and nickel.

This article provided by NewsEdge.