MANILA – The Philippine economy will benefit from the recent downtrend in world oil prices but long-term competitiveness would hinge on consistency of energy policies, Pultizer Prize winning author Daniel Yergin said today.
In a press conference, Yergin, who is vice-chairman of global consulting firm IHS, said the Philippines would do well to maintain its energy policies instead of pursuing changes as this could scare off investments.
“The lesson from around the world again and again, to assure that you have adequate electricity to support economic growth is consistency in energy policy. Not making changes from short term things; rather, taking a long range view because investments are being made over a 40- to 50-year horizon. You just can’t change back and forth, what you want to do is encourage investments,” he said.
Author of Pulitzer Prize-winning “The Prize: The epic quest for oil, money and power,” Yergin said that while the Philippines’ Electric Power Industry Reform Act of 2001 (EPIRA) hasn’t foreseen recent developments in the sector, holding ground is still the best thing to do to ensure the credibility of the economic and political system.
The EPIRA set forth the restructuring and privatization of the power sector primarily to improve supply of electricity and bring down state debts. Critics, however, have put the legislature to task for EPIRA’s alleged failure to bring down electricity rates and secure electricity supply.
“In this environment we’re in now — and I see it in governments around the world — you have to be realistic of how the markets have changed: the attitudes of investors have changed, they have more choices, they are more careful, and have more capital discipline. Consistency and realism I think are [fundamentals] of a wise investment regime,” Yergin said.
The Philippines, however, is in a good position to take advantage of the recent downtrend in world oil prices brought about rapid growth in supply amid a slowing global economy.
Yergin said that this “cycle” in world oil prices — which began to peak in the last 10 years only to be arrested by technological advancements, new discoveries and the global economic slump — bodes well for net oil importers like the Philippines.
“We are in a period now in which we are going to see prices re-calibrated to a lower level to what we’ve seen in the past few years because of this growth in supply and also in the near term because of the slowing world economy. There’s always risk of disruption and new crisis, but if you look at the fundamentals of supply and demand, we are going to be in a lower price band we’ve seen in the last few years,” he said.
Despite this, the country should still continue to promote diversity in fuel supply, Yergin said, adding that the Philippines should not rely solely on a single energy source such as renewable energy, which in the experience of Germany, has led to soaring electricity rates to the detriment of industries.