HIGHER international oil prices could cause commodity prices to spike in the Philippines but this will be temporary, according to the National Economic and Development Authority (Neda) and local economists.
In an interview on Tuesday, Neda Undersecretary for Policy and Planning Rosemarie G. Edillon told the BusinessMirror that the agency is still in the process of running the numbers, as the Department of Energy is rushing contingencies in the aftermath of the drone attacks on Saudi Arabia’s oil facilities.
Edillon said the Philippines has other trade partners who can supply it with oil, so any uptick in oil prices and inflation may be temporary at this point.
“We’re expecting the US will actually step up. So if they can step up production [the impact will] just [be] temporary,” Edillon said. “It also depends on the response of the US with respect to their production and with respect to the political response.”
In a Facebook post, the Ateneo Center for Economic Research and Development (Acerd) estimated that with higher oil prices, a 1.1-percent inflation in September would be in order.
Inflation in September will still be low given that inflation peaked in September 2018 and the decline in rice prices due to rice tariffication will counter any increase in oil prices.
Acerd Director Alvin P. Ang told the BusinessMirror it would be difficult to say whether high oil prices will continue to affect inflation given that geopolitics was a greater factor in why this has happened.
“Let’s hope that things settle down internationally and diplomatically. Remember we are entering the cold months when oil prices are seasonally higher,” Ang said. “The faster the international community addresses this issue the better for everyone.”
Former Dean of the School of Economics of University of Asia and the Pacific (UA&P) Peter Lee U said the impact on inflation may be minimal if the oil supply disruption will last for only a few weeks.
U said the impact of high oil prices on inflation will largely depend on “how high and how long the price spike will last.” He said he is not that updated on the extent of the damage given that the Saudi government is still assessing the situation.
For his part, UA&P Dean Cid Terosa said higher oil prices will certainly impact on prices given that Saudi Arabia is a major oil supplier. It can also be noted that the Philippines is a net oil importer.
Terosa, however, agreed that the length of time needed to respond to the situation will determine the impact of the incident on oil prices and commodity prices in the country.
“There will be an upward pressure on prices given that Saudi Arabia is a major supplier of oil. Also, the last quarter of the year often shows greater demand around the world. This will further put pressure on existing supply and contribute to an increase in prices,” Terosa said.
Meanwhile, UnionBank Chief Economist Ruben Carlo Asuncion told the BusinessMirror that inflation is expected to increase in the coming months but not because of the oil supply shock arising from the attack on Saudi Arabia’s oil facilities.
Instead, the increase in inflation, Asuncion said, will likely come from seasonal sources. If there would be an impact on commodity prices, he said, it may be “subdued.”
He noted that the Philippines sources its petroleum requirements largely from the United Arab Emirates.
Department of Energy data showed that only 12 percent of the country’s oil requirements come from Saudi Arabia, he said.
Based on data from the Philippine Statistics Authority, electricity, gas and other fuels has a weight of 7.435 in the consumer price index using a 2012 base year.
Image credits: Ceasar M. Perante