Worsening traffic & rising oil prices

In not so distant past, we used to have summers that afford us brief respite as far as traffic jams are concerned. Yes, as students take a two-month vacation. Though some may take summer classes, they are just too few and should not be able to influence the country’s metropolises’ traffic conditions.

For instance, in Cebu alone, there has been no let up as far as traffic jams are concerned. These traffic jams are doubly painful as oil prices are on the rise.

Don’t blame TRAIN for these increases. Yes, the excise tax may have contributed but not so significant to be branded as the main culprit. The fact is, global oil prices increased considerably this year as historical data from Brent will show. Why do we use Brent’s information?  It is because “Brent oil makes up more than half of the world's globally traded supply of crude oil.” So that, “Brent blend crude serves as benchmark price for purchases of oil worldwide.” It is traded electronically via the ICE futures exchange.

To recall, at the start of the year (January 2, 2019, the first trading day), Brent oil was selling at US$54.91 per barrel. Last week (April 11, 2019), the price was US$70.83 per barrel. Simply put, Brent oil rose by almost 16% in a little over three months.

It is no secret that our country imports at least 90% of our domestic oil consumption. That’s huge in any language. Since global oil trade is denominated in US$, our peso’s performance against it is a huge influence too. Remember, since middle of February, 2017, the peso-dollar exchange rate was prevalently already beyond P50 to a dollar. Consequently, not only that we bear the brunt of the rampaging oil price rise, we have to also spend more pesos in every dollar of oil imports.

With these increases in global prices of oil coupled with the peso’s weakness against the US dollar, local retail prices have been badly hit. Collectively, with these two scenarios prevailing, fuel prices are already sickening. Worse, in huge metropolises like Metro Manila and Metro Cebu, where traffic jams double ones fuel consumption, oil-related miseries are becoming so unbearable.

Remember, our traffic situation is known worldwide through a study of Japan's International Cooperation Agency or JICA. To recall, in 2012, JICA’s study revealed that “the time lost by people within the traffic jams plus the cost of operating vehicles in Metro Manila and neighboring towns add up to around P2.4 billion per day”.  Well, that was six years ago. Today, it could run to more than P3 billion a day.

Moving forward, indicators are not on our side. Pundits are predicting that oil prices may reach US$80.00 (historically, oil price almost hit US$150.00 per barrel already) per barrel towards the end of the year as the US economic sanctions on Venezuela and Iran will be in full swing. Not only that, OPEC (the world’s largest cartel) has continued to cut production to enjoy better prices. Moreover, the ongoing turmoil in Libya (another major oil producer) is also expected to escalate. Thus, affecting oil supply.

Also, the country’s imports outpace exports.  With such deficit, our monthly dollar inflows from the OFWs will not be enough to cover it. Not only that, with a stronger dollar, hot moneys are also going out of the country as foreign investors shift to it.

You may not also believe it. Though prices of cars may have been affected by a stronger dollar, car sales are still picking up. Well, thanks to our OFWs and the zero-down-payment schemes of car dealers. They got more pesos now for every dollar earned abroad. Consequently, they are adding to the traffic congestions in the metropolises.

Indeed, with all these three unfavorable conditions (oil prices, peso-dollar exchange rate and traffic congestions) in the mix, the situation can go from bad to worse.