October 11th, 2022
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) says that he expects the P5.80/liter increase in diesel prices next week to stay put or even retreat in the days after, as world oil prices begin to fall again amid a strong dollar and profit-taking by traders.
“OPEC’s announcement of a supply cut was a signal for prices to go up, but the dollar’s strength, fears of a global recession, and profit-taking by oil traders have brough prices down again. I expect crude prices to go below 90 USD this week before stabilizing a little above that, but lower than last week’s prices.”
“Thus, it is very probable that the P5.80 price increase in diesel will be followed by a rollback in the weeks or even days after. Give world prices a lag time of around 7 to 14 days to reflect in pump prices here.”
“Plus, coal is going down, so I don’t see any big justification for price increases in the power sector. I would advise the Energy department and the Energy Regulatory Commission to be tighter with allowing power sector price increases in the coming weeks.”
Salceda emphasized that he sees oil prices hovering between 80 and 95 dollars for much of the rest of the year, “so pump prices shouldn’t move too much either, from now until December. Although, I think on the net, prices should be trending slightly lower.”
Food prices remain biggest inflation threat
“Thus, the biggest inflationary threat remains food inflation. And I see fertilizer prices complicating that,” Salceda explained.
Salceda says that he sees fertilizer prices beginning to inch up, “making farm inputs more expensive.”
“Aggregate fertilizer prices have begun going up significantly for the first time since their April 2022 peak. And usually, from September to December, fertilizer prices tend to inch upward. That’s going to make our efforts towards cheaper food more difficult.”
“In many big agricultural countries like the United States, whose relationship with major fertilizer exporters Russia and Belarus is strained, this is already their most expensive harvest on record. This is a good time to use PBBM’s ‘friend-to-all, enemy-to-none’ policy.”
“So, I hope President Marcos gets favorable outcomes from his discussions with Russia and Indonesia on fertilizer supply. Getting those contracts now and having the fertilizer distributed to farmers will be critical,” Salceda said, referring to President Marcos’s announcements of talks between the country and fertilizer-producing countries.
“In particular, fertilizers towards the rice, corn, and sugar sectors will be essential in managing food price issues this year and in 2023. For sugar, if we don’t do enough fertilizers, the structural shortage in sugar supply could grow larger in 2023. And, given our political institutions’ hardheaded approach to sugar imports, that will kill jobs and increase prices more.”