Oil price hike looms

The Christendom's observation of the Lenten season is finally over.  Capped by a weeklong vacation or family reunions of urban dwellers in their provincial residences or preferred holiday destinations, it ended yesterday, Easter Sunday.  It culminated with a rush back home amidst throngs of faithful and vacationers who tried to compete for every available public transport space just to get a night rest before plunging into the usual regular day routines.   On the other hand, apart from the crowded beaches, those who preferred to remain in the metropolis enjoyed roads totally devoid of traffic jams and illegally parked vehicles.  However, though few, the scarcity of public transport presented a little concern for the faithful who wished to pay homage to the Great One. 

Nevertheless, while we were setting aside our normal hectic schedule and heaps of paper works, some global economic news with positive outlook came about.  These are the two correlating statistics that could mean that the US economy is, indeed, on its way up the pit.  First and foremost, in a recently released report, the US Labor Department said that "jobless claims" were at its lowest since September 2007 at 304,000.  It simply means, more Americans are returning back to gainful employments as days pass.  Corroborating this rosy development are the current gains in car sales in the USA in the month of March among the world's "Big 8" (GM, Ford, Chrysler, Toyota, Honda, Nissan, Kia/Hyundai, Volkswagen) automakers.

These increases are more than just "a flash in the pan", respected industry analysts declared.  They firmly believe that (with this and other encouraging economic indicators considered) the road to a steady recovery is well-paved.   Indeed, knowing fully well that consumer confidence and spending account for more than two-thirds of the US economy, then these bits of positive news are totally refreshing for the rest of the world.  Logically, with new jobs coming, more and more Americans will have money to spend.Likewise, economic managers of the USA agree that they've gone through the most difficult part of the recession.  They further agreed that there are signs of leveling off and that the world's biggest economy will steadily grow from now on.

While the favorable developments in a country where the rest of the world's economy largely depend are very encouraging, these are not worth rejoicing at all.  While it is true that exports to the USA may soon pick up, the downside could pose a problem to countries, like the Philippines, that are largely dependent on oil imports.

It can be recalled that 2008 saw the rise of oil prices to US$147.00 per barrel in July and witnessed its plummeting to US$37.00 per barrel towards the end of the year.  Its price decline was never difficult to comprehend.  It was primarily due to a sizeable drop in the demand for oil in the USA.  Undeniably, the world's biggest consumer is the USA.  They consume more than 20 million barrels a day or more than ¼ of the world's output.  Therefore, demand for oil is largely influenced by USA's industrial and personal consumers' behavior.  Precariously, the USA was in dire economic crunch since the middle of 2008 until end of 2009.  In fact, then, all indicators point not just on recession but deflation as well. With its sheer size, its economic turmoil traversed all over the globe.  Manufacturing and financial companies were closing down.  Foreclosures of mortgages were worst.  Consequently, economic activities like manufacturing had largely slowed down. As these manufacturing outfits used to consume sizable quantities of oil, its demand therefore had substantially dropped.On the other hand, as 88% of the US workforce travels by car, a sizeable chunk of the country's consumption was eaten by this sector.  As more of them were losing jobs and were opting to use public transport instead, their oil purchases had considerably dropped as well. 

Obviously, therefore, as jobs and other economic indicators turn brighter day by day, consumer spending will again shoot up.  Consequently, the US economy leaps and the demand for oil will certainly increase.  Logically, oil prices will again shoot up, and we, as an oil importing country will again be in the receiving end of the bargain.  Coupled with higher consumption in diesel fuel to power second hand generator sets (to cover energy supply deficit), the problems could be worst.       

Moreover, as the US economy recovers, its currency (dollar) will further appreciate against our peso.  While our OFWs might rejoice in it, our non-dollar earners may just have to bear the brunt of its appreciation.  Remember, the oil price increase alone is already a burden.  Since oil imports are dollar-denominated, the dollar's appreciation will certainly rub salt into the wound.

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