Triple whammy  

Nowadays, among professionals and businessmen, whether in the board room, coffee shops or barbershops, the dollar’s strength (hovering around P54 to a dollar), oil prices (over US$110 per barrel), the inevitable price increases of basic commodities and food insecurity concerns will either top or end their discussions. 

Same is true among peddlers and street vendors as they try to think and argue to justify their existence in sidewalks and gutters. Amusingly, almost everyone has become instant economic pundits brandishing their in-depth analysis on the nation’s current financial health.

Indeed, we can’t help but agree on that aphorism that Filipinos have very short memory. To recall, about a decade ago, whether in the same informal talks or discussions or economic briefings, we didn’t hear anything but complaints about the strength of the peso. As if, nobody is happy, not anyone gained. In fact, when it was at its strongest on February 28, 2008 at P40.40460 to a dollar, calls for civil disobedience were even floated. 

Likewise, about sixteen years ago (on July 17 2006), when the exchange rate was a seemingly uncontrollable P54.8620 to a dollar, both educated and unschooled critics became instant prophets of doom. Doomsayers, as they have always been, were trumpeting here and there that the country was holed into a bottomless pit, a hopeless situation.

Yes, inflation rate then was high. Gasoline prices seemed unreachable. Fares then went up.  Basic commodities appeared as valuable as gold for the underprivileged Filipinos. Poverty-stricken, most of our brother Filipinos settled for crumbs just to fulfill their modest desires to half-fill their empty stomachs. 

The truth though is, whatever direction the peso goes, certain demographics will always benefit.  Exporters and OFWs rejoice when it depreciates and importers cheer when it appreciates. Sadly, the rest will just have to navigate or simply bear the consequences of it.   

However, with oil prices rising and the US dollar strengthening at the same time, the situation will be entirely different. As we also import some of our very basic needs like rice, the impact could be even severe. 

Yes, it is no secret that our country imports at least 90% of our domestic oil consumption. That’s huge in any language. Since global oil trade is denominated in US dollars, our peso’s performance against it is a huge influence too. Remember, on the first working day of the year, the exchange rate was P50.974 to a dollar. Last Wednesday, June 22, it was at P54.207 to a dollar. It simply means that the dollar appreciated further against the peso in the first six months of the year by 9.6%. Consequently, not only that we bear the brunt of the rampaging global oil price rise, we have to also spend more pesos in every dollar of oil imports.   

Collectively, with these two scenarios (increases in global prices of oil and US dollar’s strength) prevailing, local fuel prices will be more sickening. Worse, in huge metropolis like Metro Manila and Metro Cebu, where traffic jams double one’s fuel consumption, oil-related miseries will become so unbearable. That is if it isn’t yet.

Moving forward, indicators are not on our side. Today, as the protracted war in Ukraine rages on and the sanctions against Russia are starting to bite, oil price indicators aren’t rosy at all. Experts, in fact, predicted that oil prices shall remain beyond US$100 per barrel until the end of the year. The possibility that it may go below US$100 per barrel will be sometime January next year yet. Lest we forget, historically, oil price hit US$147.02 per barrel already in July 11, 2008. Given the uncertainty of the war between Russia and Ukraine, the possibility that it will set a new record high isn’t remote. 

What makes the situation worse for us is the recent development from our sources of rice imports, Thailand and Vietnam. Reportedly, in reaction to India’s ban on wheat and sugar exports (and the possibility that it will also do the same for rice) and to also “boost their bargaining in the global market”, Thailand had reached out to Vietnam to coordinate and jointly raise their prices. As we cover our rice shortages through imports from these countries, this development will make prices of this commodity unreachable to most of our brethren.

All these three unfavorable conditions in the mix, the current situation can go from bad to worse.  Indeed, not just double but a triple whammy.