"Around the world, from South Asia
and Africa to Europe and Latin America, the cost of filling a car’s tank,
getting to work and cooking dinner has spiked.
“NO ES SUFICIENTE” — It’s not enough. That was
the message protest
leaders in Ecuador delivered to the country’s president this past week after he
said he would lower the price of both regular gas and diesel by 10 cents in
response to riotous demonstrations over soaring fuel
and food prices.
The fury and fear over energy prices that have exploded
in Ecuador are playing out the world over. In the United States, average gasoline prices, which have jumped
to $5 per gallon, are burdening consumers and forcing an excruciating political
calculus on President Biden ahead of the midterm congressional elections this
fall.
But in many places, the leap in fuel
costs has been much more dramatic, and the ensuing misery much more acute.
Families worry how to keep the
lights on, fill the car’s gas tank, heat their homes and cook their food.
Businesses grapple with rising transit and operating costs and with demands for
wage increases from their workers.
In Nigeria, stylists use the light
of their cellphones to cut hair because they can’t find affordable fuel for the
gasoline-powered generator. In Britain, it costs $125 to fill the
tank of an average family-size car. Hungary is
prohibiting motorists from buying more than 50 liters of gas a day at most
service stations. Last Tuesday, police in Ghana fired tear gas and rubber
bullets at demonstrators protesting against the economic hardship caused by gas
price increases, inflation and a new tax on electronic payments.
Image
Discontent over soaring fuel prices
prompted angry demonstrations in Quito, Ecuador.Credit...Martin Bernetti/Agence
France-Presse — Getty Images
The staggering increase in the price
of fuel has the potential to rewire economic, political and social relations
around the world. High energy costs have a cascading effect, feeding inflation,
compelling central banks to raise interest rates, crimping economic growth and
hampering efforts to combat ruinous climate change.
The sanctions on Russia, the largest exporter of oil
and gas to global
markets, and the retaliatory sanctions that followed have caused gas and oil
prices to gallop with an astounding ferocity. The unfolding calamity comes on
top of two years of upheaval caused by the Covid-19 pandemic, off-and-on
shutdowns and supply chain snarls.
The spike in energy prices was a
major reason the World Bank revised its economic forecast
last month, estimating that global growth will slow even more than expected, to
2.9 percent this year, roughly half of what it was in 2021. The bank’s
president, David Malpass, warned that “for many countries, recession will be
hard to avoid.”
In Europe, an over-dependence on
Russian oil and natural gas has made the continent particularly vulnerable to
high prices and shortages. In recent weeks, Russia has been ratcheting down gas deliveries to
several European countries.
Across the continent, countries are
preparing blueprints for emergency rationing that involve caps on sales,
reduced speed limits and lowered thermostats.
As is usually the case with crises,
the poorest and most vulnerable will feel the harshest effects. The International Energy Agency warned
last month that higher energy prices have meant an additional 90 million people
in Asia and Africa do not have access to electricity.
Expensive energy radiates pain,
contributing to high food prices, lowering standards of living and exposing millions to hunger. Steeper
transportation costs increase the price of every item that is trucked, shipped
or flown — whether it’s a shoe, cellphone, soccer ball or prescription drug.
“The simultaneous rise in energy and food
prices is a double punch in the gut for the poor in practically every country,”
said Eswar Prasad, an economist at Cornell University, “and could have
devastating consequences in some corners of the world if it persists for an
extended period.”
In many places, livelihoods are
already being upended.
Dione Dayola, 49, leads a consortium
of about 100 drivers who cruise metropolitan Manila picking up passengers in
the minibuses known as jeepneys. Now, only 32 of those drivers are on the road.
The rest have left to search for other jobs or have turned to begging.
Before pump prices started rising,
Mr. Dayola said, he would bring home about $15 a day. Now, it’s down to $4.
“How do you expect to live on that?” he said.
To augment the family income, Mr.
Dayola’s wife, Marichu, sells food and other items on the streets, he said,
while his two sons sometimes wake at dawn and spend about 15 hours a day in
their jeepneys, hoping to earn more than they spend.
The Philippines buys only a
minuscule amount of oil from Russia. But the reality is that it doesn’t really
matter whom you buy your oil from — the price is set on the global market.
Everyone is bidding against everyone else, and no country is insulated,
including the United States, the world’s second largest oil producer after
Saudi Arabia.
Persistently expensive energy is
stirring up political discontent not only in places where the sanctions on
Russia seem remote or irrelevant but also in countries that are leading the
opposition to Russia.
Last month, Mr. Biden proposed
suspending the tiny federal gas tax to reduce the sting of $5-a-gallon gas. And
Mr. Biden and other leaders of the Group of 7 this past week
discussed a price cap on exported Russian oil,
a move that is intended to ease the burden of painful inflation on consumers
and reduce the export revenue that President Vladimir V. Putin is getting.
Price increases are everywhere. In
Laos, gas is now more than $7 per gallon, according to GlobalPetrolPrices.com; in New Zealand, it’s more
than $8; in Denmark, it’s more than $9; and in Hong Kong, it’s more than $10
for every gallon.
Leaders of three French energy
companies have called for an “immediate, collective and massive” effort to
reduce the country’s energy consumption, saying that the combination of
shortages and spiking prices could threaten “social cohesion”
next winter.
In poorer countries, the threat is
more fraught as governments are torn between offering additional public
assistance, which requires taking on burdensome debt, and facing serious
unrest.
In Ecuador, government gas subsidies
were instituted in the 1970s, and every time officials have tried to repeal
them there’s been a violent backlash.
The government spends roughly $3
billion a year to freeze the price of regular gas at $2.55 and the price of
diesel at $1.90 per gallon.
On June 26, President Guillermo
Lasso proposed shaving 10 cents off each of those prices, but the powerful
Ecuadorean Confederation of Indigenous Nationalities, which has 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
subsided.
“We are poor, and we can’t pay for
college,” said María Yanmitaxi, 40, who traveled from a village near the
Cotopaxi volcano to the capital of Quito, where the Central State University is
being used to shelter hundreds of protesters. “Tractors need fuel,” she said.
“Peasants need to get paid.”
The gas subsidies, which amount to
nearly 2 percent of the country’s gross national product, are starving other sectors
of the economy, according to Andrés Albuja, an economic analyst. Health and
education spending was recently reduced by $1.8 billion to secure the country’s
large debt payments.
Mexico’s president, Andrés Manuel
López Obrador, is using money the country makes from the crude oil it produces
to help subsidize domestic gas prices. But analysts warn that the revenue the
government earns from oil can’t make up for the money it is losing by
temporarily scrapping taxes on gas and by providing an additional subsidy to
companies that operate gas stations.
In Nigeria, where public education
and health care are in dire condition and the state cannot ensure its citizens
electricity or basic safety, many people feel that the fuel subsidy is the one
thing the government does for them.
Kola Salami, who owns the Valentino
Unisex Salon in the outskirts of Lagos, has 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 think we can even. …” His voice trailed off.
In South Africa, one of the world’s
most economically unequal countries, the rising price of fuel has created one
more fault line.
As President Cyril Ramaphosa
campaigns for re-election at the ruling African National Congress’s conference
in December, even the party’s traditional allies have seized on the cost of
fuel as a failure of political leadership.
In June, after fuel reached beyond
$6 a gallon, a record high, the Congress of South African Trade Unions marched
through Durban, a city already wrecked by violence and looting last year, and
floods this year. Higher fuel prices have been “devastating,” Sizwe Pamla, a
spokesman for the trade unions, said.
The dizzying spiral in gas and oil
prices has spurred more investment in renewable energy sources like wind, solar
and low-emission hydrogen. But if clean energy is getting an investment boost,
so are fossil fuels.
Last month, Premier Li Keqiang of
China called for increased coal production to avoid
power outages during a blistering heat wave in the northern and central parts
of the country and a subsequent rise in demand for air conditioning.
Meanwhile, in Germany, coal plants that were
slated for retirement are being refired to divert gas into storage supplies 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, the executive director of the International Energy Agency.
At this point, the only scenario in
which fuel prices go down, Mr. Birol said, is a worldwide recession."
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