TO borrow a sports metaphor, the government’s decision to lift its idiotic freeze on land transport fares was a “Hail Mary” pass that saved most modes of land transport — jeepneys, provincial and city buses, etc. — from sure bankruptcy. The provincial bus operators who sent an SOS to the national government via an urgent appeal for fare adjustment were not exaggerating when they claimed that they will not survive without a fare hike.
“When the cost of the state-regulated revenue (meaning the fares regulated by the government) is lower than the cost of the service delivered (meaning ferrying people from point to point or through fixed routes), no business will survive,” the provincial bus operators said in their desperate plea for a fare increase, which was heeded by the government only on Friday. Sept.25.
And there is a one word explanation on why the bus operators were able to claim that the cost of moving bus passengers was much higher than the revenue from the state-regulated transport fares: diesel. Rather, the elevated cost of diesel.
The cost of diesel at the pump in most parts of the world right now, according to economists, is not based on the prevailing global market price of crude at $100 per barrel or even lower. It is based, rather, on a crude oil price of $190 to $200 per barrel. Economists say the shortage in the global refining capacity makes it costlier to refine diesel and refiners impose a so-called “crack spread” that makes diesel the costlier distillate to produce. Costlier than, say, gasoline.
The current price of diesel at our pumps, which have not dropped to below P85 per liter over the past several weeks, is in sync with diesel prices in many parts of the world: It is based on crude oil prices $190 to $200 per barrel. And not on the actual global, which is lower.
It is easier to explain the shortage of refining capacity for diesel, the basis of the “crack spread” that makes its price higher. Two wars, one initiated by Vladimir Putin — the Russia-Ukraine war that led to the disastrous drone attacks on Russian refineries — and another enabled by Donald Trump — the Gulf war which led to the bombing by Iran of refineries of US allies in the Gulf region. On top of that, of course, is the closure of the Strait of Hormuz, which has crippled the movement of diesel from the Gulf into fossil-dependent countries like the Philippines.
It is safe to say that many developments have conspired to make diesel prices stay at elevated levels in our country. And that is tragic for a country like ours where most passenger buses and cargo trucks run on diesel. It is diesel that powers 99 percent of our provincial buses, city buses and cargo trucks. In the absence of rail, it is the diesel-fed provincial buses, the big ones with routes that cover Metro Manila to key cities of Mindanao, that also function as the de facto mass transport system.
The greater tragedy is this: The elevated prices of diesel make up anywhere from 45 to 60 percent of the current operating costs for both city and provincial buses. As much as the government wanted to delay any fare hike adjustment because that adjustment would lead to inflationary pressures, it also realized a basic fact of economics. That the cost of regulated fare is far, far below the cost of the service delivered. Not adjusting the fares would be the equivalent of running the land transport industry to the ground. Hence, that grudging decision to lift the ban on fare hikes done last Sept. 25.
Question. Why did we fail to shift to electrified or hybrid buses, which would have lessened our dependence on diesel-fed modes of land transportation, especially the critical city and provincial buses? And which could have lessened the pressure on the government to approve fare adjustments for buses. Bus suppliers, most of them from China, cannot supply the Philippines with either electrified or hybrid buses that cover the necessary range. We have no buses that can travel the 700 to 1,000 kilometer range for round trips in the long-distance routes. Another problem is the absence of charging infrastructure.
There is no available bus incentive program that would hasten the shift to electrified or hybrid buses. The last incentive program for the bus industry — read this and you will weep — was carried out in 1988 during the presidency of Cory Aquino and under Transportation Secretary Oscar Orbos.
What about the broader world? Is it as spooked as the Philippines on the diesel issue?
Here is an example on how desperate the broader world is in its efforts to rein in the surge in diesel prices. The US, a net exporter of crude oil, wants to take the unprecedented step of temporality banning diesel exports, a move no US president in contemporary history has even considered. Trump is planning to impose a temporary ban on diesel imports to check rising diesel prices in the US which, like the Philippines, is dependent on diesel-fed cargo trucks and passenger buses.
It is safe to assume that much of the broader world is roiled by diesel-related problems.