Rising oil prices push up business operating costs

CEBU, Philippines — The rising oil prices have started to burden businesses as they've seen higher operational costs.

While consumers are directly affected by higher transport costs, businesses are feeling the brunt as well, said Mandaue Chamber of Commerce and Industry vice president for external affairs Steven Yu.

"The rising of fuel prices to historical high levels is unprecedented in our country. Businesses and consumers alike will feel the heavy burden that it brings to our day-to-day costs of living," the businessman told The FREEMAN in a phone interview yesterday.

As a result, companies are cutting down on unnecessary expenses to offset higher operational costs.

"We have to cut down on unnecessary expenses and work to generate more sales to compensate for the higher costs," the MCCI official said.

Businesses are likewise looking to operate more efficiently through innovation.

"We need to use innovation to increase productivity and drive efficiency," Yu pointed out.

"Unlike in previous years though, the rise in tourism, BPO (business process outsourcing) and OFW (overseas Filipino workers) revenues somehow cushioned the impact to consumers. They are feeling the pain but they will survive," he further explained.

Yu noted the business sector is hoping global fuel prices will soon go down.

"We also hope that international crude prices will eventually correct, and the inflationary effect of the rise in other food items will fade away once government increases supply," the business leader said

"There is still light at the end of the tunnel. We hope that next year will be a better year. On the side of the businesses, the effect of competition and rising costs is a double jeopardy," he said.

"But it will also bring out the best in you. It will make you learn innovation, perseverance and resiliency," Yu said.

The government has been urged to suspend the second round of excise tax hikes on petroleum products due next year as world oil prices continue to rise.

The government started imposing higher excise tax on fuel products January this year as part of its tax reform program. 

Dubai crude, which is used by local oil firms to price their products, has been hovering above $77 a barrel since last week. On Tuesday, it hit $82.89.

According to a provision in the Tax Reform for Acceleration and Inclusion (TRAIN) law, the next tranche of excise tax increases may be suspended if Dubai crude averages $80 per barrel for 3 months.

The government has blamed the high global cruide oil price for the quickening inflation, which hit 6.4 percent in August.