Rising oil prices: Unyielding upward spiral (7th this week)

As the sun rose on Tuesday this week, so did the price of oil, casting a shadow of concern over the lives of Filipinos and businesses. Gasoline witnessed a daunting surge of PHP1.10 per liter, diesel by PHP0.20, and kerosene by PHP0.70. This marked the seventh consecutive week of oil price hikes, a disconcerting trend that reverberates through the lives of Filipinos, inflicting a cascading impact on the economy.

The tumultuous landscape of global politics has played a pivotal role in steering the price of oil. The lingering cloud of the Russia-Ukraine conflict has cast its shadows on the world market, wielding an unprecedented influence on oil prices. As one of the world's leading oil exporters, Russia's power to sway markets rivals that of Saudi Arabia. With its incursion into Ukraine, a cascade of international sanctions swept across Russia, led by the United States and Canada. These embargoes throttled Russian oil imports, culminating in a surge in crude oil prices to a staggering USD130 per barrel on March 20, 2022. This upheaval translated to a surge in pump prices, echoing across the Philippines, with gasoline and diesel prices soaring to as high as PHP85 per liter in the National Capital Region (NCR) and breaching the PHP100 mark in provinces. This turbulent tide of oil price escalation rippled through all sectors of the economy, pushing up commodity prices and escalating transportation and freight costs.

The spiraling costs of gasoline, diesel and gas pose an existential threat to both consumers and businesses. The ramifications are far-reaching, affecting the cost of raw materials, transportation, freight, and utilities such as electricity and water. This domino effect drives up production costs, which inevitably seep into the prices of goods. Yet, businesses grapple with a conundrum -- transferring the burden of increased production costs onto consumers could lead to shrinking consumer bases. The culinary realm, epitomized by restaurants and coffee shops, treads cautiously, reducing portions to cushion the blow of exorbitant prices. Even the humble pandesal, a staple of Filipino life, has shrunk in size as bakers adapt to surging costs of sugar, flour, and raw materials.

In the midst of these tumultuous times, the government has responded with a nationwide increase in the minimum wage. Effective July 16, 2023, the National Capital Region (NCR) witnessed an additional PHP40 added to the minimum wage. Yet, this increment stirs a quagmire for the beleaguered business sector, particularly micro, small and medium-sized enterprises (MSMEs) still grappling with the repercussions of the Covid-19 pandemic.

A precarious equilibrium seems to elude both workers and employers. Workers find their salaries eroded by inflation, with the family wage of PHP1,161 per day barely sufficing for the daily needs of a family of five. Entrepreneurs grapple with the tension of maintaining business viability amidst unrelenting pressure from both ends. A harmonious understanding between these two factions could potentially keep businesses afloat while workers sustain their livelihoods. The inflationary strain introduced by ceaseless oil price hikes engulfs businesses and individuals alike, leaving a trail of uncertainty and unrest in its wake.

Reflecting on the recent past, the pandemic's cataclysmic impact saw around 380,000 small businesses temporarily close shop in 2020, displacing approximately one million workers. In 2021, the Philippine Statistics Authority (PSA) unveiled a grim reality: 259,707 establishments permanently closed their doors and 56,971 temporarily shuttered, affecting 147 million workers. These closures transpired in 2020 and 2021, but the reverberations of oil price hikes born from the Russia-Ukraine conflict are yet to be fully realized. News headlines bear testament to the plight of well-known establishments forced to cease operations.

Prominent restaurants and coffee shops, once thriving bastions of culinary culture, succumbed to the combined onslaught of the pandemic's aftermath and unrelenting inflation. Their resilience during two years of lockdowns pales in the face of escalating oil prices, forcing their reluctant withdrawal from the scene.

In the transportation sector, a resounding call to increase minimum fares echoes through the corridors of power. Buses, jeepneys, taxis and ride-hailing services beseech the Land Transportation Franchise and Regulatory Board (LTFRB) for fare hikes, attributing their plight to surging oil costs. Should their plea be heard, the commuter public will bear the brunt.

Proposals advocating the government's reduction of fuel taxes as a countermeasure to mitigate oil price hikes raise valid concerns. However, this strategy could inadvertently deplete government revenues, potentially pushing it towards more borrowing from domestic and foreign sources.

Efforts to recalibrate the oil industry landscape are gaining traction among lawmakers and the executive branch. The Downstream Oil Industry Deregulation Act of 1998 (Republic Act 8479), responsible for replacing the Oil Price Stabilization Fund, is under scrutiny. This law ushered in an era where market dynamics dictated fuel costs, relinquishing the Department of Energy's intervention power, which now lies dormant as giant oil corporations dictate pricing, imports and exports.

Lingering suspicions of an oil cartel's existence lend credence to the notion that market competition has waned. Instead of vying for supremacy, the so-called Big Three seemingly collude, dictating fuel price hikes collectively each week. This alarming trend exacerbates the plight of ordinary Filipinos as unmitigated oil price increases slice through their daily lives.

The crux of the matter is the urgent need for a comprehensive review of existing legislation. A robust policy is imperative to alleviate the ravages of oil price hikes and empower the government with the capacity to intervene in the local oil market. As current events continue to showcase, oil prices remain on an unwavering ascent. It is high time for the government to step in once more, steering the ship towards a significant reduction in fuel prices, thus lightening the burden on the people's shoulders.