Fuel products are substantially rolled back today. This is a double-edged event.
To be sure, the rollback is welcome. It reduces pressure to raise transport fares. It will proportionally bring down transport costs that have been a major cause of higher food prices the past few months.
In sum, today’s rollback and the reductions that happened in the previous two weeks will help greatly in holding down the inflation rate that has been rather elevated for two quarters now. Prices tend to escalate during our long Christmas season when consumer spending is most robust.
Should our yearend inflation rate settle at close to 4 percent – the upper range of our inflation targeting – then our monetary authorities will feel less compelled to raise interest rates. We need to continue the expansionary monetary policy adopted by the Monetary Board to help stimulate the domestic economy.
Our domestic economy, driven mainly by consumption demand, was badly hit by the pandemic. Our monetary authorities are targeting a 7 percent growth to get our economy back to its pre-pandemic growth track. That growth target could be met by keeping inflation rates low to encourage borrowing to grow our enterprises.
In a word, there is a long sequence of policy decisions that follow from the level of inflation our economy posts. This sequence of policy decisions will determine the pace of our economic recovery.
Unfortunately, the rather dramatic reduction in pump prices will very likely be short-lived. It is caused mainly by the drop in global crude oil prices reflecting the panicked response to the discovery of the Omicron variant.
Fears about what the new variant could do to global economic activity caused a retreat in most stock exchanges and in most traded commodities. With cases surging dramatically in Europe, traders fear a new round of lockdowns and travel restrictions. Many countries stoked the panic by closing their borders in the vain hope of preventing entry of the Omicron variant. To date, about 38 countries have reported cases of infection by the Omicron variant.
Infections attributed to the Omicron variant have been confirmed in several US states. Given the US’s record in managing infections and some amount of public resistance to minimum public health protocols, a major outbreak could happen in the US during the winter months when people spend more time indoors.
We do not know enough of this new variant yet. The data available is still scarce. We could be getting more definite information about this new variant towards the end of this week or early next week. Epidemiologists are busy investigating.
Early (and inconclusive) observations seem to indicate that the Omicron variant may be more transmissible than the previous Delta variant. It seems to infect children more, but this could be because most adults have been fully vaccinated. The South African health authorities tell us that while the new variant may be more infectious, it appears less deadly than the Delta variant.
We hope their initial observations are valid. The Delta variant, we will recall, powered a massive global surge, especially in large and populous countries such as India and Indonesia.
The great Delta variant surge hit the Philippines as well, bringing up infection and death rates to their highest during this pandemic. Several countries in Europe, possibly dealing with both the Delta and Omicron variants, are posting unprecedented infection numbers. Germany, the other day, ordered its unvaccinated citizens locked down.
The Omicron variant has not yet been detected in the Philippines. This does not mean, however, that it is not here.
Because of the adequate supply of vaccines, we have been able to ramp up inoculations. We might be able to sustain vaccinations at around a million doses per day. We have the vaccine supply. In fact, some of the vaccines we have in our stockpile are close to their expiration dates, making a ramped up vaccination program all the more urgent.
Mercifully, the increased vaccination dramatically brought down our daily infection rates and the number of active cases. This week, we moved from low risk to minimal risk status, according to indicators set by the WHO.
By the most recent numbers, we should qualify as a “green” country. Travelers from the Philippines should have little difficulty crossing borders. However, many countries have shut down their borders to travelers from everywhere. This is part of the panicked and possibly futile effort to keep the Omicron variant away.
Most of our major urban centers have been vaccinated to herd immunity levels. This diminishes the possibility of rapid spread of even a more transmissible Omicron variant.
The uncertainty posed by the half-understood Omicron variant kept us from downgrading the hyper-vaccinated NCR to Alert Level 1 status. That could still happen by Dec. 15, depending on how much we know about Omicron.
Even if Omicron manages to enter the country, we are not likely to see a rapid spread. Should that happen, epidemiologists say a surge could happen by February or March.
If preliminary findings that Omicron, while more contagious, causes less severe symptoms, then our health care system remains relatively safe. The lower rates of infections we saw in the past two weeks saw hospitals converting their COVID-19 wards into regular beds.
In sum, the lower prices for fuel are a mixed blessing. When the world becomes less panicked, oil prices will rise again. The oil producers have not invested in new capacity and the OPEC retains its cap on output.
This cartel could be the real curse on our recovery.