![]() A few days ago, world oil prices ticked downward on news that US oil inventories might soon go up. There are hopeful signs that the surge might be ebbing away. Will oil prices continue to rally for the rest of 2018? This is bad since Iran is currently the world’s 5th largest oil producer. Third, US President Donald Trump’s decision to pull out of the Iran nuclear deal and reinstate “powerful” sanctions could effectively choke Iran’s oil exports. Second, Venezuela – which sits on top of the world’s largest oil reserves – is currently gripped by economic and political turmoil, and this has led to a collapse of its oil production. On the other hand, world oil supply has gone down for a variety of reasons.įirst, the Organization of Petroleum Exporting Countries (OPEC), an oil cartel, decided to cut its production till end of 2018, jacking up oil prices and increasing their profits. As world production grows – especially in emerging economic behemoths like China and India – so does the demand for petroleum products like gasoline or diesel. In January, the IMF revised upward its forecast for global GDP growth in 20, from 3.7% to 3.9%. On the one hand, world oil demand is higher because economic growth worldwide is brisk. Why the uptick? It’s basic supply and demand. I also said that the plunge in oil prices was borne largely by a combination of weaker demand and stronger supply in the international oil market.īut now, more than 3 years later, the tables have turned: world oil demand has strengthened while world oil supply has weakened, thus the comeback of high oil prices.įigure 2 shows that the international benchmark called Brent Crude is at a 3-year high, breaching the $80 per barrel mark for the first time since late 2014. I said, “For a lot of motorists out there, the sharp drop in gas prices may well be the best Christmas gift they’ll receive this year.” ![]() In a previous piece, I noted the sudden but welcome plummeting of world oil prices in late 2014. Why is inflation so high? I want to focus first on two international factors that could explain it: the recent surge in oil prices and the continued weakening of the peso. The situation is worse if we stick to the original 2006 base or reference year, in which case inflation in April actually reached 5.1%, the highest in more than 6 years. ![]() Forecasts suggest inflation may have risen even more in May. This level, the highest in over 5 years, is above and beyond the Bangko Sentral’s upper target of 4% for 2018. In April, the country’s inflation rate – which measures how fast prices are rising – has reached 4.5%. They should also avoid making callous remarks that tend to belittle the poor and add insult to their economic injury.įigure 1 summarizes where we are. In these tough times, government officials must be wary of populist policies that could make matters worse. I also outline the different policies government could pursue to abate the present economic hardship of our people. In the second part, I focus on the role of TRAIN (President Duterte’s tax reform law) and explain why its timing could not be worse. In this first part, I explore the two international factors behind the inflation spike, namely higher world oil prices and the continued weakening of the peso against the US dollar. Why is all this happening? In this two-part series, I explain the causes and consequences of the recent inflation spike, and what government can do to cushion its impact. Your weekly budget for groceries might buy fewer items than before. ![]() Restaurants and food stalls have revised their menu prices upward. Gas pump prices now hover between P55 to P60 per liter. More and more Filipinos are reeling from the recent acceleration of prices, with little to no relief in sight.
0 Comments
Leave a Reply. |