Oil, although being a socially sensitive product, remains one of the country’s key sources of energy, particularly for transportation. According to data, the Philippines utilizes about 400,000 barrels of oil every day. Furthermore, rising oil costs will undoubtedly harm the economy and people, particularly those earning less than the minimum wage, as they may cause inflation to skyrocket.
Inflation would average between 4.4 percent and 4.7 percent “in the worst-case scenario” of oil prices reaching $120-$140 per barrel this year, according to Bangko Sentral ng Pilipinas Governor Benjamin Diokno. Higher oil and non-oil prices prompted the central bank to forecast its inflation prediction for 2022 to 3.7 percent from 3.4 percent.
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. 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.
Before it’s too late, the national government must move quickly to address rising oil prices. The unpleasant impact of the imminent big-time oil price hike on consumers this week, according to politicians, can only be eased by the lifting of the excise tax imposed on oil items under the Tax Reform for Acceleration and Inclusion or Train Law.
Oil companies 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 P4-P4.10 for kerosene due to the volatility of oil prices in the world market amid the Russia-Ukraine conflict over the weekend, prompting some lawmakers to make the same call.
Inflation reduces purchasing power, which may dampen local government units’ efforts to revitalize their local economies, which have been battered by the pandemic and natural disasters. People could avoid attending events or cancel plans to visit tourist attractions to unwind; they could spend their hard-earned money only on necessities and save the rest in their bank accounts. And, if people do not spend, the economy will remain stagnant.
