Oil crisis: Will get worse before it gets better

Once again, nowadays, among professionals and businessmen, whether in the board room, coffee shops or barbershops, the dollar’s strength (hovering around P60 to a dollar), oil prices (nearing 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, eighteen years 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 twenty 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 remaining strong against our peso 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 more than 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 nearing P59 to a dollar. On March 19, it went beyond P60 to a dollar. It simply means that the dollar appreciated further against the peso in just under three months. Consequently, not only that we bear the brunt of the rampaging global oil price rise, we have to also spend a peso more 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.

Seemingly, indicators are not on our side. Today, as the protracted war in Ukraine rages on and the sanctions against Russia eased a little bit, this animosity sees no relief at all.    Additionally, the Iran War has escalated and major oil fields, ports and refineries in the Gulf region are deliberately hit. Thus, the oil supply situation will only get worse even if the ongoing conflict is resolved. 

Lest we forget, historically, oil price hit US$147.02 per barrel already in July 11, 2008.  Given the uncertainties of these two ongoing wars (Russia vs. Ukraine and Iran vs. USA/Israel), the possibility that it will set a new record high isn’t remote. 

We can find some solace though in the fact that some credible institutions are predicting a not so precarious situation in the long run. For one, according to OANDA Group (through marketpulse), “Brent oil prices (the global benchmark) are and will be experiencing high volatility in March 2026, trading near or above US$100–US$114 per barrel due to severe supply disruptions in the Strait of Hormuz.”  Moreover, it further noted that “while some analysts project short-term spikes toward US$120–US$150 if tensions escalate, mainstream forecasts expect prices to average around US$70–US$85 for 2026 before potentially softening in 2027.”

Obviously, therefore, the situation will get worse before it gets better.