Editorial | Wednesday, 04 June 2008

Time to reflect

The declaration by the Finance Minister that a rise in surcharge is now inevitable should send shockwaves to both business circles as well as to consumers. Clearly the days of cheap oil are over, and repercussions will very shortly have a dramatic effect on our lifestyles and on the way business is transacted. The rise in surcharge must trigger a national debate on how we can all control our excess use of energy. There can be little doubt that government is faced with a situation beyond its control, particularly in this country of ours where all our energy needs are totally dependent on imported oil. The question is how the government can cushion the effect of this high increase. It is agreed that the country is not buying oil at the present market price, but fact remains that all businesses and consumers are going to be paying more for commodities, and as a result, government must limit the discomfort the price-hike is likely to generate. This can be done by considering the suggestion made by the French president to cut the amount of VAT paid on the increased price. It is worth pointing out that every increase in the price of oil has brought about an increase in VAT revenues for government. Also, since oil is traded in US Dollars, the benefit of the weak value of the currency has been enjoyed by government but not by the consumer. Government and the constituted bodies represented in the MCESD would be well advised to carry out an honest assessment on the increase in comparison to the value of the dollar. The powers that be should give serious consideration to the capping of VAT as a way of lessening the devastating effect this is going to have on our economy, including the purchasing power of consumers - who are not only being hit by higher oil prices but also by increases in the price of food.
Because we have delayed, we fell far behind our competitors in the development of alternative energy sources. We have no oil reserves, despite years of oil-drilling interest - which has not in fact resulted in any positive progress. Accordingly, any increase in the price of oil will hit us harder than other countries, as we are now at the mercy of the oil producing countries and speculators on the world market, who have a lot to answer for. Countries are now insisting on the introduction of independent audits, in order to give light to the disturbing evidence that much of the increase in the price of oil is due to international speculators and unscrupulous profiteers.
Equally disturbing are the findings of the Eurostat report on food prices and particularly, that Malta has experienced the second highest rise in food prices in the euro zone, with food prices having increased by 9.7 per cent last year. This figure amounts to twice the yearly inflation rate and will have devastating effects on the disposable income of consumers. The European report recognises, and not surprisingly, that Malta effectively suffers from lack of competition, since in a country the size of ours, a handful of importers are dominating the market and effectively hindering competition. This statement bears analysis and investigation by the office of fair competition, which has been given the specific brief to ensure that the market is not distorted, that fair competition is not hindered and that cartels are not formed to the detriment of the interests of consumers. While recognising that our small market makes it difficult for perfect market conditions to operate, it is worth noting the trend of many a consumer to not only compare prices but also to flock towards supermarkets offering more advantageous prices – thanks to direct EU importation where middlemen are cut off. The wiser businessman is now waking up to this reality, as it will become all the more evident once prices of food continue sky-rocketing. We shall be living in a more price conscious world where eating habits and trends are going to change and fast. Outside forces will carry on having devastating effects. There is growing evidence that methods to tackle climate change are also partly to blame for rise in food and energy costs. Everything is beginning to be questioned, including whether it is morally or ethically correct to be feeding grain to animals while people in large parts of the carry on starving. There are warnings that global catastrophe may take place unless food reaches parts of the world where it is most needed. In such a scenario it is imperative that we rethink how food is distributed and find a happy balance between feeding animals and getting grain to people suffering from starvation. Fortunately our country is not in such dire straits, but we can wave good-bye to cheap food and cheap oil. The consequences are still to be felt. It certainly is time to reflect.