Ethanol and alternative energy vs. Congress

There are a number of investors and groups seeking to develop ethanol, coco-diesel, other alternative fuels to petroleum. Problem arises when investors and entrepreneurs cannot just come in and risk their money because they need lots of permits and licenses from the government, especially Congressional law that will give them a franchise or tax perks and other incentives.

But if ethanol production and marketing looks promising and profitable, why would companies and private investors need congress approval and a law to put in their money? It's their money; if they succeed, they'll become very rich. If they fail, say when petrol prices and other alternative fuels become cheaper, they'll lose their investments and savings.

Again, it's that animal called "congressional franchise" that creates monopolies and oligopolies, or simply discourage investors (and job creation) from coming in. Or a law "mandating the use of ____ (ethanol, LPG, biodiesel, etc.) in the Phils." Why would government mandate and coerce? Let people decide. If they love petrol because of that "power and speed" in their vehicles despite its high prices, then let them use petrol products. If they love ethanol and LPG or what because of that "love for environment, cheaper price", then let them use those alternative fuels. Government is a useless body to intervene on purely individual decisions like this.

Government's role is mainly to protect lives, private property, individual freedom, even public morals. It should get out in the business of mandating or forcing people to use this or that kind of fuel to use in their cars and motorcycles and trucks.

It's true that many businesses want to monopolize certain markets. Pretty much like tricycles want to monoplize a route and want to ban the presence of jeepneys and FX in their route. Or jeepneys wanting to monopolize a route and don't want to see FX and buses competing with them. Congress (and LGUs, for tricycle franchises; or LTFRB for jeepney & bus franchises) is one good institution to secure monopoly or oligopoly position through legislative franchise.

About claims that government intervention is necessary as "referee" among car manufacturers, oil companies, sugar and agri producers (as fuel raw materials), there are already lots of government intervention existing. In sugar production, there are the Sugar Regulatory Administration (SRA), Dept. of Agriculture (DA), Dept. of Trade and Industry (DTI), and so on. In car manufacturing, DTI-BOI; and in oil industry, the Dept. of Energy (DOE), Energy Regulatory Commission (ERC). On top of these, there are regulation interventions by the Dept. of Finance (DOF) for local and import taxes, the DENR (environmental clearance certificate, exploration permit), Congress (franchises, tax hikes or relief, budgetary subsidies), the LGUs (local business permits, real property tax), and of course, Malacanang and the Office of the President (OP), and any of the 40 presidential advisers and consultants.

We can generalize that every business and economic activity in the country has lots of government intervention. One indicator is the high incidence of informal or underground economy (43% of GDP is from UG economy, WB estimates 2005) as many private enterprises try to dock the multitude of licenses, permits, registrations and inspections that various govt. agencies demand from them.

So, to seek another layer of government intervention, like a law (now still a Congress bill) "mandating the use of ethanol" is seeking another set of bureaucratic paper work, certificates, permits, licenses, registrations and inspections -- and their corresponding fees, charges, taxes, fines.

About the perception that oil companies will "not put the same amount of money to find replacement to crude oil", I think it's wrong. See how British Petroleum (BP) advertises itself now -- wind energy, solar energy, other alternatives, that it now calls itself Beyond Petroleum (BP). Notice also the evolution of gas stations in the Philippines -- they are largely convenience stores, food and coffee shops, car repairs and oil change, etc. As if they're saying, "We're a convenience store and all; by the way, we also sell gasoline." Much like the evolution of National Bookstore, "We're a shop for school and office supplies, VCDs and DVDs, and all; by the way, we also sell books!" Or McDo hamburger's evolution, "We have a McCoffee, we sell pasta, fries and sundae; by the way, we also sell hamburgers."

Companies evolve where demand change and where new supply becomes more available. Oil companies will still invest a lot in petroleum because profitability in this commodity remains high. When profitability in alternative fuels will go up, then those oil companies will put in their money to those new projects.

That's the beauty of competition, of free market, of minimal (if not zero) government intervention in business. Companies and individuals who do not change and adjust can perish (lose their jobs) while those that continue to innovate expand (expand job creation). Government should come in only when a food shop is also selling hand guns, bullets and grenades. Or when an oil company or gas stations are also selling plutoniom and other nuclear devices.