BRACE FOR THE WORST

Analysts see oil price hikes not easing up soon

Filipinos may have to tighten their belts a little longer as the relentless wave of oil price increases may not end anytime soon. In fact, analysts say oil consumers may have to brace for more price hikes in the coming weeks ahead as the global supply of oil remains tight on the back of persistent supply bottlenecks.

Just this week, motorists were greeted with another round of fuel price hikes. Local oil companies on Monday raised gasoline and diesel prices by P1.45 per liter and P1.90 per liter, respectively, while kerosene prices – the fuel primarily used in aviation – also went up by P1.70 per liter.

For this month alone, the cumulative net increase in fuel prices already stood at P4.95 for gasoline, P7.20 for diesel, and P6.75 for kerosene. This is on top of last year’s net increases that amounted to P15.80 for diesel, P16.20 for gas, and P11.50 for kerosene.

The Philippines remains at the mercy of the volatile global oil market as it is heavily dependent on oil importation. With the unpredictability of the ongoing pandemic and the geopolitical tensions around the world that could easily make or break crude prices, Filipinos are in for a wild ride.

Leading investment banks Goldman Sachs and Morgan Stanley are expecting crude oil prices to hit $100 per barrel this year as inventories continue to ebb further. The Organization of the Petroleum Exporting Countries (OPEC) – a cartel of 13 countries that produce about 40 percent of the world’s crude oil – also reported thinning spare capacities that may be injected into the market.

The supply side is not the only problem. Oil market analyst OilPrice also noted that refiners remain wary of ramping up operations because of the pandemic which has resulted in inventories hitting multi-year lows.

Energy Secretary Alfonso Cusi earlier said that prices of local petroleum products are expected to further increase until the first quarter of this year given the current tightness in oil supply in the world market.

Energy prices may begin to decline by the second semester as supply constraints ease, but before we can heave a sigh of relief, additional spikes may occur.

The continuous uptrend in oil prices is being feared to increase transport fees anew, especially if pleas to suspend the enforcement of excise taxes on oil products will not be heeded by the government.

Moreover, higher oil prices could trigger a higher inflation rate and bring prices of basic commodities to go up. It will also have an impact on the eventual pass-on cost in the electric bills of consumers since gas pricing is still heavily linked to oil.

The significant impact of oil price movements in Filipinos’ daily living has brought to the fore the need to immediately pass House Bill 10386 or the Unbundling of Fuel Prices Bill that aims to make the oil pricing scheme transparent.

This would mandate fuel companies to itemize the details of oil price movements in the country so consumers would know how much of the charges are being transferred to them. It would also prevent over-pricing on the part of oil companies that implement weekly cost adjustments.