FreeThinkers Forum: Impact of oil price increase

Impact of oil price increase

Posted by Primer C. Pagunuran on 7/22/2008, 7:48 pm
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Impact of oil price increase

There appears to be a contemporary global thinking that embraces the view that the oil game is over. Stated simply, those rounds of oil price increases – from $30 to $40 to $50 to $60 to $70 per barrel of oil – will hit $100 per barrel. And there seems to be a truism on this prevailing mindset given that oil price increases were never seen falling in the world market.

In the end, there is an evolving ‘economic world war’ between the oil-producing countries that export this product and those countries that are dependent on oil via importation. The global law of supply and demand, from a macroeconomic perspective tells us that the war is won on the exporters’ side. And ironically enough, up until today, such prices are demand-driven. It would have been worse if supply decisions from these oil exporting countries have come to play.

However, here in the Philippines, like politics, economics is local. The impact of oil increases will, by and large, hit badly in our domestic lives. Ordinary wage earners will understandably suffer the most as soon as its adverse effects will be passed on to the prices of goods and services given a consumer-led economy. Even the rather palliative or nominal wage increase that has been legislated in recent memory has done very little to compensate for the economic effects of such oil price increase.

There are quarters who think there is something that the government can do to cushion off its social and economic impact. One is a temporary reduction on the 3% tariff on oil. Another proposal is to succumb to oil rationing. Lastly, there are other cost reduction plans being laid out such as shorter or lesser use of electricity in government offices such as maybe the three-day work week in Congress.

As a people, Filipinos are known to adjust automatically when domestic problems crop up. The word that best describes this national trait is resilience. If we cannot afford the transport fare, we walk or even perhaps, bike our way to our place of work. Does this not explain the phenomenal increase in the motorcycle-riding population?

Like other governments, there is not much that can be done. The era of the oil game is indeed probably over. The oil-producing states will dictate what the world price per barrel would be upon those states that are largely dependent on them. In short, over-dependency has become a universal problem that individual states should resort to other possible alternatives to move away from this heavy and crippling dependence on oil imports.

The next time we go to the mall or department stores to discover how well the prices of basic commodities and other consumer items have jacked up, we should not be anymore surprised. Things are bound to happen – life can be a lot worse than it used to be. This serves as a domestic challenge – everybody in the household must find work to get a little income.

Each day will soon be a survival problem to not a few other families – our marginalized. Our economic experts are heard to make any kind of proposal and it is yet uncertain if the government will be willing to subsidize oil price increase through some form of temporary tax holiday. Will it do a tax embargo at this point in time that its anxiety to project an economic growth has preoccupied it?

Oil price increases – and their second-round effects – stare us all to the face. If there is not much the national government can do for us, then, maybe we have to help ourselves enough. This rising tide of oil price increases, figuratively speaking, will probably wipe out all societies lying below sea levels. And our country is no exception.

In the meantime, let us fight it out in the home-front. Let every able-bodied and responsible-thinking member, aged 18 and above, in our household do some productive economic activity just so to bring in money to contribute his/her share to the overall household expenses. There is no time for lethargy.

The current oil price shocks are soon to be felt even harder since there will be no shift in the terms of trade between the oil-exporting and the oil-importing countries. All of us, no exception will be the unintended victims of this world economic order. But as societies or governments must do their part, every individual in any given society or government must do his or her share as well.

And, the challenge has just begun.