Economic freedom and oil price changes

Hifalutin words like economic freedom seldom ring a bell for majority of our citizens who aspire for a better life. Somehow, these words just don’t seem to connect to their everyday lives.

Yet, this simple phrase spells the difference between a dogged day-to-day existence and one where they are able to realistically plan for a brighter future.

Yes, economic freedom is a measurement that is tracked by a few international agencies, the two highest ranked being that of Fraser Institute (Economic Freedom of the World or EFW) and The Heritage Foundation with The Wall Street Journal (Index of Economic Freedom or IEF).

Both are guided by the principle that a country’s laws can be measured to equate to how an individual is able to accumulate wealth in a free economic environment.

The EFW tracker is more comprehensive and authoritative but is about two years late. The IEF, on the other hand, is more current and used by the Bangko Sentral ng Pilipinas, and as such will be cited in this column.

In the most recent IEF ranking, the Philippines performed well, with its standing moving to 76, clearly now belonging to the top half of the list of 178 countries. In the previous year, the country was at the lower half, having been ranked 89th.

The IEF indices for economic wealth are: property rights, freedom from corruption, fiscal freedom, government spending, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, and financial freedom.

Good grades

One can expect the measurement science to be complicated and as complex as the terminologies used. On a macro level, the ranking should parallel a more accepted measurement of growth: economic productivity, or gross domestic product (GDP).

Of course, there is a slight disconnect to individual perceptions since the vestiges of economic freedom as well as GDP filter down to the mass base a couple of years later. Thus, all these consistent “good grades” will only be really felt a few years down the road.

Becoming smug and over-confident

That said, there is room for celebration, but there is also the need to be cautious of becoming smug and over-confident. After all, the Philippines is still at a low 76th place, with a score of 62.2 out of 100 points, and this can best be reflected in how Filipinos actually feel about how their lives are faring.

While improvements were largely credited to the moral performance of the current national government and administration, specifically in the realm of corruption control, this has not been noticed in the local government levels, which the citizenry personally is in contact with.

Local corruption, or its control, is still largely a function of the integrity of local leadership, i.e., a morally upright (or corrupt) mayor determines the ease of doing business in the community.

Until the pillars of ethical governance become intrinsically entrenched in society, we can only hope that we will have chief executives on the national and local levels whose commitment to righteous governance will protect the citizenry. 

Oil prices and windfall profits

With crude oil (and pump prices) creeping up again, the “correction” period has started. Expect oil price movements to go up and down in the next few months until a more stable bandwidth is established.

The world has endured through almost a decade of comparatively stable crude oil and oil product price movements, albeit high levels, and has forgotten one such phenomenon that comes with fluctuating prices: windfall profits.

This would be most applicable to the time when prices went on a steep decline late last year, from $100 per barrel of crude to $40 in a span of just a few months. Understandably, considering the time gap in reflecting lower crude prices at the retail pumps, oil companies and their dealers will be awash with cash resulting from that relaxed period.

If our transport sector had diligently passed on the gains that it benefited from lower pump prices, so should others. Calling Revenue commissioner Kim Henares.

‘Correct‘ oil price

So what would the “correct” oil price be? There is no official word from the spokespersons of the great oil cartel, the Oil Producing and Exporting Countries (OPEC), and would likely not happen.

But unofficial sources have pointed out a leveling at $60 per barrel, which is about the average economical cost of crude oil extraction in America’s vast shale formations. There will be less economical fields that will be shut down, but by and large, those that will remain open will be able to influence continued lower-priced oil prices.

In short, the era of cheaper oil will still be with us in the next few months, especially since there is a remote possibility that OPEC members will vote to shut down their pipes to influence prices going back to the $100 levels.

Still, there are other factors that may come into play in this new environment. But we can worry about that next year. In the meantime, let’s enjoy this brief respite from the restraints of high gasoline and diesel prices.

PSA awardee: Champions League (PCCL)

The Philippine Sportswriters Association (PSA) recently held its annual event to honor the country’s finest athletes in the year 2014 and organizations that have made their mark in Philippine sports.

PSA is an organization of over a hundred sports editors, reporters, columnists, and correspondents representing national broadsheets, tabloids and major sports websites.

Philippine Collegiate Champions League (PCCL) was one of the organizations recognized by PSA with a special citation for contributing to the development of collegiate basketball through the annual search for one national collegiate champion.

For the past 12 years, Champions League (PCCL) organized and managed a multi-level nationwide tournament bringing together champions and top rank teams from different leagues all over the country.

The annual competitions started with 10 leagues led by UAAP, NCAA, and CESAFI-Cebu. As of 2014, there were 35 leagues participating in the search for a national champion.

San Beda College Red Lions, five-peat NCAA champion, is the 2014 National Collegiate Champion and only the second NCAA team to win the prestigious title.

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Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.