Rising world oil prices will inevitably affect us 

Published February 24, 2021, 12:47 AM

by Manila Bulletin

This is one price we have to pay for the return of our economy to normal – high prices for gasoline and diesel which drive our industries as well as our cars.

This week, the price of gasoline is expected to rise from ₱1.25 to ₱1.30 per liter, and diesel from ₱0.90 to ₱0.95 per liter. Kerosene is one vital commodity for many households and is also the base for aviation fuel. Its price is expected to rise from ₱1 to ₱1.10 per liter.

These local oil price increases are the natural result of price movement in the world oil market. Many countries are starting to reopen their industries, resulting in an increase in the consumption of fuel, triggering – in obedience to the law of supply and demand – an increase in prices.

There has been a steady increase in the global demand for fuel. Last February 11, the Internal Energy Agency (IEA) in Paris, France, forecast that the demand will reach 5.4 million barrels a day in 2021, rising to a high of 96.4 million barrels a day.

This is approximately 60 percent of the drop in world oil consumption at the height of the pandemic last year. As the world recovery continues, we can expect further increases in oil consumption — and, consequently, corresponding oil price increases.

And the process is just beginning. We will see a steady increase in fuel prices as factories resume operations and cars in the millions return to the world’s highways.

This early, the government should start planning for the inevitable impact of these high fuel prices. They are bound to raise the cost of all goods in our markets – as these are all produced in oil-fueled factories and transported to market, along with farm products, by diesel or gasoline-fed vehicles.

The last time our prices zoomed to unprecedented heights was in 2018, when inflation reached 6.8 percent in September. They were brought down by the massive importation of rice, our nation’s basic food commodity.

We hope we will never again experience those trying days of 2018 when market prices rose day after day due to a combination of rising world oil prices, a fall in peso value in relation to the US dollar, and high local demand and price manipulations.

World oil prices are now beginning to rise, inevitably affecting local consumer prices. We have to accept this rise, as part of the world’s recovery from the pandemic. But we have to monitor it closely so we can take steps to protect the most vulnerable among us – the poor families of the country.