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Gas prices around the world threaten livelihoods and stability

“No ES suFICIENTE” – It is not enough. It was message Ecuador’s protest leaders reached out to the country’s president last week, saying they would cut the price of both regular gas and diesel by 10 cents in response to rioting demonstrations over fuel and food prices.

The anger and fear over fuel prices that exploded in Ecuador is playing out around the world. In the United States, average gasoline prices have jumped to $5 per gallon, burdening consumers and forcing an unbearable political reckoning for President Biden ahead of this fall’s midterm congressional elections.

But in many places, the jump in fuel costs has been more dramatic and the subsequent misery more severe.

Families worry about how to turn on the lights, fill the car’s gas tank, heat their homes, and cook their food. Businesses grapple with rising transportation and operating costs and 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 a gasoline-powered generator. In Britain, it costs $125 to fill the tank of an average family-sized car. Hungary prohibits motorists from buying more than 50 liters of gas per day at most service stations. Last Tuesday, police in Ghana fired tear gas and rubber bullets at protesters protesting against gas price hikes, inflation and economic hardship caused by a new tax on electronic payments.

A staggering increase in the price of energy has the potential to reshape economic, political and social relations around the world. High energy costs have a cascading effect, fueling inflation, forcing central banks to raise interest rates, stifling economic growth and hampering efforts to combat devastating climate change.

The invasion of Ukraine by Russia, the largest exporter of oil and gas to global markets, and subsequent retaliatory sanctions have sent gas and oil prices plunging with staggering ferocity. The unfolding disaster comes on top of a two-year upheaval caused by the Covid-19 pandemic, off-and-on shutdowns and supply chain snarls.

A major reason the World Bank revised its economic forecast last month was a rise in energy prices, estimating that global growth will slow more than expected to 2.9 percent this year, roughly half of what it was in 2021. Bank president David Malpass warned that “for many countries, it will be difficult to avoid recession”.

In Europe, overdependence on Russian oil and natural gas has made the continent particularly vulnerable to high prices and shortages. In recent weeks, Russia has been reducing gas deliveries to several European countries.

Across the continent, countries are preparing blueprints for emergency rationing that could include limits on sales, lower speed limits and lower thermostats.

As with crises in general, the poorest and most vulnerable suffer the hardest consequences. High energy prices could leave an additional 90 million people in Asia and Africa without access to electricity, the International Energy Agency warned last month.

Expensive energy radiates pain, contributes to high food prices, lowers living standards and exposes millions to hunger. Steep transportation costs drive up the price of every item that’s trucked, shipped or flown — whether it’s a shoe, a cellphone, a soccer ball or a prescription drug.

“The simultaneous rise in fuel and food prices is a double whammy in the gut of the poor in practically every country,” said Cornell University economist Ishwar Prasad, and could have devastating consequences in some corners of the world if it continues. for an extended period.”

In many places, people’s lives are already disrupted.

Dion Dayola, 49, leads a union of about 100 drivers who take passengers in minibuses known as jeepneys in Metropolitan Manila. Now only 32 of those drivers are on the road. The rest have left to find other work or turned to begging.

Before the increase in pump prices, Mr. Dayola said he brings home about $15 a day. Now it’s down to $4. “How do you expect to survive that?” He said.

To increase the family income, Mr. Dayola’s wife, Marichu, sells food and other items on the streets, while his two sons sometimes wake up in the wee hours of the morning to spend about 15 hours a day in their jeepney, hoping to earn more than they do. will spend

The Philippines buys only a small amount of oil from Russia. But the reality is that it doesn’t matter who you buy your oil from – the price is set on the global market. Everyone is bidding against everyone else, and no country is singled out, including the United States, the world’s second-largest oil producer after Saudi Arabia.

Ever-expensive energy is fueling political resentment not only in places where the war in Ukraine is viewed as remote or irrelevant, but also in countries leading opposition to Russian aggression.

Last month, Mr. Biden proposed suspending a small federal gas tax to ease the sting of $5-a-gallon gas. And Mr. Biden and other leaders of the Group of 7 last week discussed a price cap on exported Russian oil, which is intended to ease the burden of painful inflation on consumers and reduce export revenue that President Vladimir V. Putin uses to wage war.

Prices have gone up everywhere. In Laos, according to GlobalPetrolPrices.com, gas is now more than $7 per gallon; In New Zealand, it’s more than $8; In Denmark, it’s more than $9; And in Hong Kong, it’s 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 could threaten “social cohesion” next winter.

In poorer countries, the threat is more fraught as governments are torn between providing additional public assistance, needing to take on burdensome debt and facing serious unrest.

In Ecuador, government gas subsidies were instituted in the 1970s and every time the authorities tried to abolish them there was 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 Ecuadorian Confederation of Indigenous Nationalities, which led two weeks of protests, rejected the plan and demanded cuts of 40 and 45 cents. On Thursday, the government agreed to cut prices by 15 cents each and the protests subsided.

“We’re poor, and we can’t pay for college,” said Maria Yanmitaksi, 40, who traveled from a village near the Cotopaxi volcano to the capital of Quito, where a central state university is being used to shelter hundreds of protesters. “Tractors need fuel,” he said. “Farmers should get paid.”

According to economic analyst Andres Albuza, gas subsidies amount to about 2 percent of the country’s gross national product, starving other sectors of the economy. Health and education spending were recently cut by $1.8 billion to secure the country’s large debt payments.

Mexico’s president, Andrés Manuel López Obrador, is using revenue from the crude oil the country produces to help subsidize domestic gas prices. But analysts warn that the government may not be able to offset the loss of oil revenue by temporarily scrapping taxes on gas and providing additional subsidies to companies that operate gas stations.

In Nigeria, where public education and health care are abysmal and the state cannot ensure electricity or basic security for its citizens, many people feel that fuel subsidy is a job the government does for them.

Kola Salami, owner of Valentino Unisex Salon on the outskirts of Lagos, had to hunt for affordable fuel for the gas generator he needed to run his business. “If they stop subsidizing,” he said, “I don’t think we can either.” …” His voice trailed off.

In South Africa, one of the most economically unequal countries in the world, rising fuel prices have created another fault line.

As President Cyril Ramaphosa campaigned for re-election at a conference of the ruling African National Congress in December, even the party’s traditional allies seized on fuel spending as a failure of political leadership.

In June, after fuel topped $6 a gallon, a record high, the South African Congress of Trade Unions marched through Durban, a city already ravaged by violence and looting last year and floods this year. Trade unions spokesperson Sijwe Pamla said higher fuel prices were “disastrous”.

The dizzying spiral in gas and oil prices has spurred greater investment in renewable energy sources such as wind, solar and low-emission hydrogen. But while clean energy is getting an investment boost, so are fossil fuels.

Last month, Chinese Premier Li Keqiang called for increased coal generation to avoid power outages during a blistering heat wave in northern and central parts of the country and subsequent surge in demand for air conditioning.

Meanwhile, in Germany, coal plants slated for retirement are being repurposed to turn gas into storage supplies for the winter.

There is little relief in sight. “We will see even higher and more volatile energy prices in the coming years,” said Fatih Birol, executive director of the International Energy Agency.

At this point, Mr. Birol said, the only scenario in which fuel prices will fall is a worldwide economic recession.

The report was contributed JOSE MARIA LEON CABRERA From Ecuador, Lynsey Chutel From South Africa, Ben Ezemalu From Nigeria, Jason Gutierrez From the Philippines, Oscar Lopez from Mexico and Ruth MacLean From Senegal.

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