October 2008 Philippine Gas Prices
The downward trend in Philippine gas prices first observed in late August and extending throughout September seems to have lost its momentum. True, the pump prices of 93-, 95-, and 96-octane gasoline, as well as that of diesel, have plunged by PHP 2.00 per liter as compared to last month’s figures, thanks to the continuing drop in crude oil prices, but the recent depreciation of the Philippine peso, according to one oil company executive, is slamming the brakes on any further reduction. For example, today’s Philippine Star noted that:
“On Oct. 6 alone, Dubai weakened to $79.45 but the peso slumped further to P47.40.”
At the end of today’s currency trading the Philippine peso closed at PHP 47.81 to the US dollar.
Another reason given by Philippine oil company executives why they can’t let retail oil prices fall as much as the public wants is the wildly fluctuating price of crude in the world market, making it difficult for them to forecast price trends.
At least one oil-producing nation – Iran – is knotting its brows at the prospect of falling crude oil prices:
“Iran’s oil minister said that a price of oil below $100 was unsuitable for both consumers and producers.”
How consumers stand to lose if crude oil prices fall below Iran’s declared benchmark is beyond me. The Persians, however, have clear cause to be worried stiff:
“About 80 percent of Iran’s public revenues come from oil exports and Iran’s oil industry needs foreign investment to keep up production and export.”
Two blogs cite two other reasons why Iran needs the extra revenue generated by this year’s record oil prices badly. First from Yourish:
“Iran has to up the price of its budget to import more gas, because in spite of having so much of the world’s crude oil, Iran has almost no refining capabilities of its own.”
That was just a summary. Put in another way:
“The Iranian government heavily subsidizes the price of refined oil products which has contributed to increased domestic demand. Iran has limited refinery capacity to produce light fuels, and imports much of its gasoline supply. Iranian domestic oil demand is mainly for gasoline and automotive gasoils, but domestic demand for other oil products are declining due to the substitution of natural gas. However, it is an overall net petroleum products exporter due to large exports of residual fuel oil. Oil export revenues represent the majority of Iran’s total exports earnings, but the country suffers from budget deficits due to a growing population and large government subsidies on gasoline and food products.”
Iran, however, has plans to increase its refining capacity by 2012.
Second from Hot Air, a more sinister reason for worry:
“That puts a great deal of pressure on two economies in particular: Iran and Russia, not coincidentally partners on the nuclear-power project at Bushehr. Both countries fund their rogue ambitions through expensive energy supplies. Iran has to import refined gasoline, which it subsidizes for Iranians in order to keep them happy, and the enormous profits it gets from pumping crude funds that as well. Without ready access to massive profits from oil production, the Iranians can’t afford to fund terrorism, its nuclear-weapons program, and gasoline subsidies at the same time. Something will have to give, and if it’s gasoline subsidies, they may face even more political unrest than they do now.”
Back home, Philippine central bank officials say inflation may have already peaked last September, at 11.9 percent:
“Economists were not surprised by the results but warned of a downside to growth.
“Victor A. Abola of the University of Asia and the Pacific said “Crude oil prices have continued to trend lower, even as the world economy, not only the US, slows down. This augurs well for the inflation front, but [is] bad news for growth prospects.”
“Jose L. Vistan of ABCapital Securities, Inc., meanwhile, said “It could be a double-edged sword … It’s good in the sense that it puts less pressure in the economy. It’s bad because it could indicate that the economy is weakening because it showed that consumer spending is slowing,” he said.
“For University of the Philippines economist and former Budget Secretary Benjamin E. Diokno, “It does not mean that prices of goods are falling.”
“Radhika Rao, economist at IDEAglobal, said the September data “surprised us on the downside, which will certainly provide more latitude to the central bank to ease rates earlier than our estimate of first quarter of 2009.”
“”The current global crisis will also pressure the policymakers to go all out to protect their domestic economies and bid adieu to a tightening cycle for the next year.”"
Meanwhile, the House of Representatives is hopeful that it will pass the proposed 2009 national budget before October 11, 2008, the day it goes on recess. With the Congress on vacation [PDF file - Ed.] until November 9, 2008, the Senate will have barely a month, or until December 19, 2008, to review and pass its own version this important piece of legislation. Add to that the inevitable horse trading that will occur at the bicameral conference committee, chances are the 2009 national budget will only be enacted into law well into the new year.
