Soaring oil prices’effects

Russia’s war on Ukraine has far-reaching effects, and the Philippines has felt the pain of the conflict: soaring oil pr i ces.

High oil prices hurt the economy and the people, especially those earning just minimum wage, as they could drive inflation to the stratosphere.

Bangko Sentral ng Pilipinas Gov. Benjamin Diokno has said inflation would average between 4.4 percent and 4.7 percent “under the worst-case scenario” of oil prices reaching $120-$140 per barrel this year. The central bank raised its inflation forecast for 2022 to 3.7 percent from 3.4 percent as it cited the impact of higher oil and non-oil prices. In 2021, inflation in the Philippines hit 4.5 percent, exceeding the target range of two percent to four percent.

Inflation is the rate at which the value of a currency is falling and, consequently, the general level of prices for goods and services is rising (Investopedia). A sack of rice weighing five kilos that’s worth P250 this month could increase in the coming weeks, if not days, due to inflation.

The National Government must act fast in dealing with the increasing oil prices before it’s too late. Sen. Risa Hontiveros, in a statement on Monday, said the anticipated harsh impact of the impending big-time oil price hike on consumers this week can only be mitigated by the lifting of the excise tax imposed on oil products under the Tax Reform for Acceleration and Inclusion or Train Law.

The lawmaker made the call after oil companies during the weekend announced an oil price hike this week ranging from P5.30-P5.50 per liter for diesel, P3.60-P3.80 liter for gasoline, and P4P4.10 for kerosene due to the volatility of oil prices in the world market amid the Russia-Ukraine conflict.

Hontiveros added that oil, being a socially sensitive product, remains one of the major sources of energy in the country especially for transportation. The Philippines consumes some 400,000 barrels of oil every day, according to statistics.

Inflation diminishes purchasing power, and this could dampen local government units’efforts to revitalize their local economies hammered by the pandemic and natural calamities. People could choose to avoid attending events or abandon plans of traveling to tourism sites to unwind; they could spend their hard-earned money only on basic needs and save the rest in their bank accounts.

If people do not spend, it means stagnation in economic recovery. (Sunnex)