Panicking over financial news that say “Don’t panic”
Basic goods enough? Source: BussinessWorld
Dealing with the spillover effects of the Russia-Ukraine conflict: rising oil prices, supply concerns, and future implications on our wallets.
When "don't worry" means the opposite
Following Russia’s invasion of Ukraine, prices of key agricultural commodities are expected to rise in the next few months. This can further complicate the distribution of goods across many countries, including ours. Despite all signs pointing towards the panic button, the Department of Trade and Industry (DTI) says we shouldn’t worry.
DTI Undersecretary Ruth Castelo claims that our supply for basic goods should last for 30 to 90 days. It will be three months until the Philippines might start to feel the effects of what’s happening in Europe. “We hope this will end soon. We have enough supply for now.”
The problem lies with the two countries in conflict being one of the main distributors of resources for the world. Russia provides 7% of global oil supply, and both Ukraine and Russia account for about 29% of wheat exports.
How will it affect our inflation and market prices? We have yet to see the extent, but I have a feeling that it won’t be something our wallets will be happy about. I’m not sure if hope is a great strategy but then again, that’s all we can do for now. And maybe, a bit of panic as well.
Running out of fuel out here
Another thing to thank Russia for is the monumental increase of gas prices. Oil companies have announced their biggest price hikes to date with no indication of going down anytime soon.
Diesel has gone up by P5.85 per liter, gasoline by P3.60 per liter, and kerosene by P4.10 per liter. The price increase took effect on March 8. My best advice is to just close your eyes while paying the gas bill.
There are talks for a one-time fuel subsidy program to help public transport workers with a budget of P2.5 billion, at least there’s that bit of good news.
Dubai crude has breached the $80 per barrel mark. If it reaches $120 per barrel, the Department of Energy estimates gasoline prices may rise to P78.33 per liter, while diesel may leap to P68.97 per liter. For kerosene, P71.21 per liter is projected, while liquefied petroleum gas could hit P107.08 per kilogram.
This has also started to affect Philippine stock. Benchmark Exchange index dropped 0.62%, or 46.08 points, to 7,342.01 while the broader all-shares index shed 0.58%, or 22.90 points, to 3,895.52.
Tough scenes all around while peace talks are still being made. In a recent statement, Mykhailo Podolyak, an advisor to Ukrainian President Volodymyr Zelensky, said he notices a change in Russia’s actions as it realizes "the real price of war." Here’s hoping they realize more of it faster.
Dolla, dolla, bill y'all
If you were hoping to purchase something in dollars any time soon, you might have to rethink checking out that cart. Yet another effect of the Russia-Ukraine conflict is the increase in price of the dollar value in exchange for peso.
The peso closed at P52.18, the last time we saw it this high was back in 2019.
ING Bank Manila senior economist Nicholas Mapa warned that we could be seeing inflation levels with the likes of 2018 which skyrocketed to a whopping 6.7%.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno also mentioned that inflation could surge to 4.7% sometime soon if oil prices continue to rise at their current rate.
To help soften the blow, Senate Minority Leader Franklin Drilon says that the government should suspend excise tax as early as now. "We are in an extraordinary situation. It is a situation which calls for the liberal application of the law and for compassion," he said.
By law, petroleum excise taxes can only be stopped if the average price of Dubai crude hits or exceeds $80 over a three-month average—a scenario that’s already happening.
While we wait for further developments on this, I suggest holding back on taking long drives anytime soon.
