The Philippines has become one of the first tangible examples of how a Middle Eastern crisis is transforming into a crisis of everyday life. The country imports nearly all the oil it needs — and the surge in prices above $100 per barrel impacts everything from production costs to the exchange rate of the national currency.
This is reported by Finway
Pesos and Historical Lows
Amid global demand for the dollar as a safe-haven asset, the Philippine currency has fallen to a record low. For a country where producers purchase raw materials abroad and sell finished products for export, a weak peso is both an advantage for exporters and an additional burden for the industry.
Electronic products account for about half of all Philippine exports. If logistics and fuel costs rise, and raw materials are purchased in dollars, the cost of production increases regardless of the exchange rate.
How the Government is Responding
President Ferdinand Marcos Jr. has appealed to Congress for emergency powers to reduce taxes on petroleum products. Concurrently, starting Monday, government agencies have transitioned to a four-day work week to reduce energy consumption.
This week, a fuel price increase of 20 pesos per liter — about $0.34 — is scheduled. The Philippine Chamber of Commerce and Industry has warned that businesses will not be able to fully absorb this increase and will inevitably pass some of the costs onto consumers.
How Businesses are Responding
Companies are reacting differently. The mining company Global Ferronickel is already negotiating with contractors to adjust rates in light of rising fuel costs. One of the largest logistics operators in the country — 2GO Group — stated that it has mechanisms to manage price volatility, but did not disclose details.
“It’s hard to imagine that anyone isn’t scared right now,” commented Sergio Ortiz-Luis, head of the Confederation of Philippine Exporters.
According to him, market participants are not yet reducing production — but the situation remains extremely tense.