"Both advanced and developing countries are now feeling the pinch."
With economic reopening comes high oil prices. Both advanced and developing economies in the world are now feeling the pinch of high global oil prices after pent-up demand from consumers and the decision of major energy producers to limit their output.
Global oil prices are racing to $80 a barrel today from just over $47 at the start of the year. Increased oil prices simply mean higher gasoline and diesel prices at the pump and increased shipping and transportation costs on goods and commodities.
For Western nations and those dependent on natural gas to warm their homes during the winter season, higher oil prices and the limited supply will translate into increased electricity charges. European and UK gas prices have already surged to record levels, fueled by concerns of soaring demand during the colder winter season.
The same high gas prices are being experienced in Asia, especially China. Many power plants in Asia, the Philippines included, rely on natural gas to generate electricity. A disruption in the supply or shortage of natural gas will prompt power generators to switch to or re-start their more expensive coal- and oil-based thermal plants. The resulting high electricity charges will add burden to the monthly bills of commercial and residential customers.
Increased crude prices directly affect the cost of transportation and the production of goods. They exert pressure on the prices and will eat into the budget of the ordinary household. The Philippine inflation rate in September has not fully reflected yet the impact of global oil prices. Relatively lower meat, rice and other food prices have offset the rising cost of transportation.
But surging oil prices in the global market will soon raise the cost of goods and services as well. The Bangko Sentral ng Pilipinas, which closely watches inflation because of its direct impact on the peso and the purchasing power of consumers, has conceded prices are not about to go down in the months ahead.
Increased consumer spending toward the Christmas season will certainly push up prices. The further reopening of the economy, as more vaccines are distributed to the population, will also fuel inflation. Filipinos, thus, might find the new normal no different from the recent normal when the cost of living was high.