Expensive oil strains economies in poor regions

After 12 hours of bone-jarring waves and skin-scorching sun and salt, Rolando Linares might pull enough fish from the Pacific to buy two gallons of petrol.

“It keeps getting more expensive and the price of fish stays the same,” says the 17-year veteran fisherman of the waters off western Guatemala.

The same soaring fuel prices squeezing family pocketbooks and slicing into corporate profits in the US and Europe are especially catastrophic in the poorest corners of the globe. Here, more money spent on petrol can push small businesses into bankruptcy and families into poverty, while straining fragile economies to the point of near collapse.

High prices at the pump across Africa are crippling public transportation and few in Asia have been harder hit than Indonesia, where the national currency, the rupiah, has fallen to four-year lows against the US dollar as skyrocketing fuel subsidies drain government coffers.

Oil prices are a national security issue for the Philippines. For every 8 euros increase in world crude prices per barrel, the government must spend an extra €1bn of its foreign exchange reserves, President Gloria Macapagal Arroyo estimates.

Terrorists “tend to take advantage of situations like this”, Arroyo said.

And even though the poor don’t have cars, they feel the higher oil prices as food, energy and transportation costs rise.

With inflation in Sri Lanka increasing to 15% thanks to high oil prices, Maheswari now skips breakfast so her 11-year-old son, Kugan, can have his.

“I am finding it difficult to have three meals for all of us,” said the housemaid, who makes a monthly salary of €52.

Presidents in Central America have for months pleaded with oil-rich Venezuela and Mexico to help bring down petrol prices. A gallon of petrol in Guatemala City, costs an average of €2.63 euros and prices in the countryside and at other points throughout the region are approaching €3.22 euros the Guatemalan Energy Department reports.

There have been frequent calls to rework the 25-year-old San Jose Accord, under which both Mexico and Venezuela provide subsidised oil to 11 Caribbean and Central American nations.

“We are all facing a grave situation,” Guatemalan Economy Secretary Marcio Cuevas said of the region. “We have to take the appropriate measures. If not, we will have a crisis, not just in the short term, but in the long term.”

In neighbouring El Salvador and Honduras, drivers have lined up at gas stations this week to buy fuel they are afraid will get even more expensive in coming days.

Cuevas said rising oil prices hurt Guatemala because 60 per cent of the nation’s electricity is produced by petrol-fuelled power plants. In Nicaragua, where oil-fuelled plants account for 85% of electric power, President Enrique Bolanos announced energy rationing measures that could cause rolling blackouts next week.

Central America’s largest oil producer, the dense jungles of northern Guatemala’s Peten province churned out 250,000 barrels of oil a day in 2004. But much of the crude pumped here has to be sent to Texas for refining, meaning oil finds do little to slow skyrocketing gasoline prices.

The rising energy and other daily costs hit Guatemalans hard, especially the estimated 60% who live on less than two euros a day.

Grinding poverty is everywhere in Tilapa, a village of cinderblock and corrugated metal shacks built on black sand alongside a salt-water lagoon.

Fishermen are especially vulnerable to rising fuel prices, as the petrol they use to fill the tanks of their speedboats costs 3.26 euros per gallon – the equivalent of as much as 12 pounds of fish.

“Here, misery comes and the people say nothing,” said 19-year-old Marco Tule, who was sitting on a crumbling wooden dock wearing a sideways baseball cap. “But with petrol like it is, this is desperation, not misery.”

Pumping petrol at an Esso Station in Guatemala City, 175 miles to the east, 40-year-old accountant Jorge Diaz said he was selling his 2003 Chevy Suburban, in large part because it costs nearly 50 euros to fill the tank.

“I love this truck,” he said. “But I need something smaller.”

Juan Francisco Reyes, who served as the nation’s vice president until January 2004, closed his trucking business on September 1, citing high petrol prices.

“I prefer to close now rather than go bankrupt and lose everything I’ve worked for in the last 60 years,” he said.

Luis Gomez, vice president of a transportation co-operative of 2,896 buses and 5,000-plus drivers in the capital, said he ordered a hold on all repairs to reduce costs that have nearly tripled since last year.

“Things go wrong mechanically and we do nothing,” he said.

Gomez said the co-operative was considering raising its urban fare of 12 cents, even though such increases have sparked violent and often deadly street protests in the past.

“A country without public transportation is a country that’s ungovernable,” he said. “Will there be violence? Will people die if fares are increased? Maybe. But without a doubt there will be chaos if things don’t change.”