Bangkok--8 Jul--Moody's Investors Service The price of oil has doubled since June last year. This has forced many governments in the Asian region to reduce their subsidy programs and raise fuel prices. In recent months, the governments of India, Malaysia and Indonesia have all been forced to raise petrol prices in response to ballooning fuel subsidy bills associated with keeping petrol prices fixed at an artificially low level. This has incurred the wrath of voters in these nations, with Malaysia and India’s coalition governments threatening to fall apart as a result of the difficult, but necessary, decision to reduce fuel subsidies. But apart from scrapping fuel subsidies, what can governments do to reduce their nation’s reliance on oil and more broadly fossil fuels? The cases of South Korea and the Philippines provide vastly contrasting examples. In Korea, the embattled prime minister has created yet another enemy for himself, by telling public servants that only half of the government vehicle fleet can be driven each day for the foreseeable future. This policy is unlikely to help to any great extent, as it will leave private demand for gasoline—the lion's share of total demand—unchanged in the world's 5th largest oil importer. The move also raises concerns about whether the Korean prime minister has opted for the short term politically convenient policy rather than making substantive longer-term changes that will reduce the economy's reliance on oil. In a contrast to the Korean government’s rationing scheme, the rising price of oil has prompted the Philippines’ legislature to provide incentives to invest in long-term solutions to the country's evolving energy crisis. While it may have taken nearly two decades, last month the Philippines’ legislature finally passed a renewable energies bill, which will provide financial incentives for the private sector to invest in developing sustainable energy infrastructure. The bill will also see government departments coordinate so as to integrate new and existing renewable energy sources to the nation’s power grid. Apart from just focusing on the supply side, the Philippines’ government recently announced a cash reimbursement scheme for low energy user households. This effectively gives incentives for households to conserve energy. While the Philippines’ government’s reforms may face problems with implementation, and have been criticised by the opposition for issues relating to transparency, they do represent a step in the right direction. Longer-term solutions, based on providing incentives to innovate and conserve energy are needed to transition Asian economies away from their dependence on oil. Mr. Nikhilesh Bhattacharyya is an Associate Economist with Moody’s Economy.com. He received his Bachelor of Economics degree (hons) from Macquarie University in 2007. After completing his honours, he worked as a research assistant at Macquarie University, looking at macroeconomic growth models. Editor’s Note: To clarify the relationship between Moody's and Moody's Economy.com—both Moody's Investors Service and Moody's Economy.com are subsidiaries of Moody's Corporation. Moody's Economy.com is a separate legal entity to Moody's Investors Service. If sourcing this article please quote Moody's Economy.com. [Southeast Asia & Australia / NZ] Hector Lim AVP/Communications Strategist Moody's Investors Service Level 10, 1 O'Connell St. Sydney NSW 2000, Australia Tel: +612 9270 8141 E-mail: [email protected] [North Asia & India] Eleanor Sheung AVP/Communications Strategist Moody's Asia Pacific Limited Rm 2510, 25/F, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong. Tel: (852) 2916-1224 Email: [email protected]