The past four years have been dominated by news inextricably linked to the financial markets and the cascading effects of a global financial meltdown. The obvious collateral damage is highly visible as international markets were rocked, recessions reared their ugly heads and unemployment became an immediate national crisis for many governments around the globe. Singular events threatened to reshape a stable and prosperous social and economic landscape, taken for granted for so long by generations.
For a long time, globalisation was almost considered a hackneyed buzzword that fell easily from the lips of political leaders and financial titans. The events that unfolded throughout this period have confirmed the inextricable link that unites the fates of countries across the continents. Few countries have been able to stave off the momentum of the financial crisis and emerge unscathed. The complex, although sometimes invisible, links of globalised trade have demonstrated a definite need to preserve this powerful relationship, which, if broken, will surely leave unsavoury consequences.
Since the end of last year and throughout the last few months, economic pundits and industrial leaders across the globe have signalled a possible turnaround in the world’s economic fortunes. Rather than steady improvement, economists believe that the financial meltdown may have been blocked, hence a return to a calm and more stable international economic landscape. This sense of cautious optimism was reflected in a more positive market sentiment as markets stabilised and began to improve.
At the same time, many are still jobless and struggling against the aftershocks of the latest bout of recessionary influenza that still threatens nations such as Spain, Greece, Italy and the United Kingdom. Clearly, the state of play is far from rosy and the expected ‘recovery’ remains at best delicate and fragile.
For a time, the savage increases in oil prices witnessed two years ago seemed to have receded as global growth appeared to stall. The stability of the oil price throughout this period appears to quickly become a thing of the past as oil prices are steadily creeping higher and higher. This increase is in turn affecting the price of fuels and gas that are continuing to march upwards almost unchecked. As these increases trickle down into the system, it is abundantly clear that consumers are being continuously challenged by these ever increasing price rises. Malta is not immune to these changes.
Like other countries, Malta has been challenged by these rises that have admittedly brought unending discontent. While subsequent governments persisted in subsidising these rises and postponing the inevitable, this administration decided to bite the bullet and allow the necessary increases in electricity and water tariffs. With the benefit of hindsight, it would probably have been wiser had these increases been staggered rather than increased all at once. At any rate, these increases were and remain inevitable whether we like it or not. These decisions have created a strong negative backlash and the party in government will probably have to pay dearly for this at the next general election!
The latest round of price hikes in petrol and gas will inevitably have their particular effects. An increased energy bill touches multiple sectors at the same time. Higher prices may signal higher inflation, as untenable costs cannot continue to be absorbed by some operators. This of course will probably lead to higher costs for products and services. These hikes will in turn inevitably touch two sensitive sectors of our economy – transport and tourism.
The latest crude oil price increase is once again creating an unsustainable strain on our energy production. The government has made it clear that it remains committed not to raise the tariffs in the face of the latest increases. The Finance Minister has admitted that the government is currently taking on between 30 and 40% of these price increases. The question is: how sustainable is this situation in the long term given our budgetary commitments and aims for fiscal prudence and responsibility?
The energy price is a hot potato and remains a political football that is played inelegantly by the present party in Opposition. PL has made a meal of this situation and has made the energy tariffs its battle cry for the past four years. The Labour Party has squeezed this inevitable situation for all it was worth and has enjoyed unprecedented political mileage from it. Unfortunately, I am not quite sure how wise this strategy will be in the long term. Clearly, it is a populist ploy that continues to baffle those who ask how the PL will reduce the tariffs without creating a financial mayhem, especially as oil prices continue to rise inexorably higher. The PL continues to skirt the inevitable question and persists in trivialising and over-simplifying a complex situation that remains beyond anyone’s absolute control.
The energy conundrum remains a collective challenge best resolved through a more bi-partisan approach. I guess this is pie in the sky as we trudge along the path of confrontational politics.
It is impossible to predict the future, although it seems safe to say that higher oil prices are here to stay. It will be almost impossible to wean us off this dependence on oil but responsible leadership calls for fresh and innovative approaches to substitute this precious commodity whenever possible with alternative modes of energy provision.
[email protected]