“Work, save, be thrifty, and be smart about your expenses.”
It doesn’t sound like much but it will definitely count for a lot in terms of practicality and doability in the light of soaring prices of basic commodities due to the Russian invasion of neighboring Ukraine. That is according to Fritz Ocampo, senior vice president and chief investment officer of BDO Trust and Investments Group, and Emilio Neri Jr., senior economist of BPI.
Due to the geopolitical conflict, the price of Dubai Crude surged 30 percent to $98 per barrel, Indonesian Coal 69.5 percent to $94.50 per metric ton, and aluminum 24.5 percent to $3,490 per metric ton year-to-date in March 2022.
In the Philippines, the price of diesel rose 18.33 percent to P60 per liter while LPG increased 39.60 percent to P961.95 per 11 kilograms.
“How does the conflict affect us?” asked Ocampo. “Even if we don’t buy our oil from Russia, all indicators of oil in the world have gone up. The cost of transportation has also gone up. Our power sources are driven by oil and coal. In the coming months, higher oil and coal prices would be passed on to the consumers through the automatic price adjustment system.
“The next administration may need to pass it on to the consumer. If the Ukraine-Russia crisis persists, consumers could see higher gasoline, diesel, LPG, and energy prices. Since our power plants are fueled by oil and coal, there could be an adjustment in energy cost.”
“Even if our coal supply is guaranteed from Indonesia, they would still sell to us at today’s global price and not at last year’s price. It is just a matter of when the new supply will arrive with the new price.”
“The country has just started to open up from the devastating effects of the Covid-19 pandemic with many businesses still closed and people still unemployed and this war happened,” noted Neri.
Neri also bared the scenario that is being played out today: “Both the US and major Middle East economies like Saudi Arabia have the capacity to produce more oil but may not be able to increase the capacity immediately. In the US, President Joe Biden has sent mixed signals to producers asking them to cut production before the conflict in Europe in order to protect the environment. However, he took it back when the war erupted. As for Saudi Arabia and other Middle Eastern producers, their membership in Opec keeps them from producing more as they need permission from Russia and other members of the cartel before they can increase output. Limiting production also helps boost prices, allowing them to generate more profits as a group.”
When asked what our country can do in this time of rising prices, both of them recommended that the government could suspend collections of the value-added tax, while consumers should manage their use of gas and electricity to minimize the impact on their monthly budget.
“With the economy opening up, people should actively seek work and maximize their earnings while saving,” said Neri.