Philippine Markets Newsletter

MONDAY MACRO: Have rising oil prices affected the Philippines’ inflation rate?

March 7, 2022

About 85% of the Philippines’ oil import comes from the United Arab Emirates, Kuwait, Russia, and Saudi Arabia. Since there are relatively few alternative energy options in the country, activities surrounding oil and oil prices have a big impact on the Philippines. 

How will Russia’s ongoing war with Ukraine and the global sanctions on Russia affect the Philippines’ inflation rate? 

Philippine Markets Newsletter: 
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Oil has often been described as the world’s most important commodity because of how it affects everything from manufacturing, the movement of people, and even geopolitical tensions.

As such, changes in global oil prices play a big role in domestic inflation rates. 

Since Russia’s war on Ukraine started in late February, we don’t see the economic impact of the war on our inflation rate just yet. The Philippines’ inflation rate for February came in lower at 3% vs the 3.3% estimate.

However, with the latest global sanctions and potential oil supply constraints, economists and analysts are pricing in an anticipated spike in oil prices. They noted that all petroleum-based products in the Philippines have had an average increase of P10. 

Filipinos are starting to see gas prices for unleaded above P60 per liter with the department of energy confirming that gasoline prices have increased by P8.75 and diesel prices by P10.85 since the start of 2022.

Another key issue is the Philippines is a net oil importer, which may affect the peso’s strength and push inflation even higher. 

As a high oil import-dependent country, moves in oil prices affect the Philippine peso. In addition, the lack of government subsidies would mean immediate pass-through of price hikes to consumers.

These price hikes will manifest in more places to the average Filipino than just the fuel they need for transportation. Oil affects nearly every commodity in physical good form as oil is used in machines, energy, packaging, and even medicine. 

Rising oil prices and the country’s oil dependence may also stunt the country’s efforts to promote the purchase of local goods as rising product prices from higher production costs tighten the gap between locally produced and imported goods.

Meanwhile, BSP (Bangko Sentral ng Pilipinas) governor Benjamin Diokno said in January this year that their inflation forecast for the coming months would only hold if crude oil prices did not settle above $95. 

On the other hand, Finance secretary Carlo Dominguez is hopeful that the events pushing oil prices up will start easing. Earlier last month, Dominguez also stated that if global oil prices hit  $100 per barrel they would be ready.

With oil prices now above the $110 mark, we can expect the inflation rate to rise in the coming months.

About the Philippine Markets Newsletter
“The Monday Macro Report”

When just about anyone can post just about anything online, it gets increasingly difficult for an individual investor to sift through the plethora of information available. 

Investors need a tool that will help them cut through any biased or misleading information and dive straight into reliable and useful data. 

Every Monday, we publish an interesting chart on the Philippine economy and stock market. We highlight data that investors would normally look at, but through the lens of Uniform Accounting, a powerful tool that gets investors closer to understanding the economic reality of firms. 

Understanding what kind of market we are in, what leading indicators we should be looking at, and what market expectations are, will make investing a less monumental task than finding a needle in a haystack.

Hope you’ve found this week’s macro chart interesting and insightful. 

Stay tuned for next week’s Monday Macro report!


Angelica Lim 
Research Director
Philippine Markets Newsletter
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