JAPAN ECONOMIST: PHL INFLATION MAY HIT AS HIGH AS 5% THIS YEAR

MANILA, MARCH 5, 2012 (PHILSTAR) By Lawrence Agcaoili

        Nomura Securities Co. of Japan warned that inflation in the Philippines could kick up to as high as 5.8 percent this year. 

        In a study, Nomura economist Euben Paracuelles said that the Philippines is one of the most vulnerable countries in the region to higher oil prices as it is importing nearly all of its oil requirements. 

“Without any fuel subsidies, there is high pass-through from imported inflation into headline domestic inflation,” Paracuelles stressed.

He pointed out that inflation could rise sharply to 5.8 percent in the “ugly” scenario, 4.9 percent in the “bad” scenario, and four percent in the “good” scenario. The BSP has set an inflation target of three percent to five percent between 2011 and 2014.

       Under its “ugly” scenario, Nomura sees the price of Brent averaging $135 per barrel this year. Oil price is seen averaging $115 per barrel in the first quarter but supply-side concerns or financial speculation intensify causing the oil price to spike to an average of $150 per barrel in the second before falling to $140 in the third and finally to $125 in the fourth quarter as demand destruction starts to kick in. 

Nomura sees oil price averaging $125 per barrel in each of the four quarters under the “bad” scenario and $115 per barrel under its base case or “good” scenario wherein it would average $120 per barrel in the first before falling to $115 in the second, $105 in the third, and $100 in the fourth.

       The rise in the price of Brent crude took a breather last week, stabilizing at about $124 per barrel but up nearly 15 percent from $108 per barrel at the end of last year. This pales in comparison to the 364 percent surge over the prior five years to the peak of $144 per barrel in July 2008. 

       As such, Paracuelles said the BSP could raise interest rates by as much as 75 basis points, bringing the overnight borrowing rate to 4.75 percent and the overnight lending rate to 6.75 percent this year in the “ugly” scenario. 

      “But in the ugly scenario, we expect a total of 75 basis point hikes to 4.75 percent given how sensitive core inflation becomes to increases in the headline number once it breaches the BSP’s target,” he added. 

The BSP slashed interest rates by another 25 basis points last March 1 bringing the overnight borrowing rate back of record low level of four percent and the overnight lending rate at six percent due to benign inflation outlook amid soaring oil prices.

http://www.newsflash.org/2004/02/be/be004481.htm

TO HIGH PRICES;  IS IT A HI OR A BYE?

          Philippines is one of the most vulnerable countries in the region to higher oil prices as it is importing nearly all of its oil requirements, this is in accordance to what have the  Nomura Securities Co. of Japan and Nomura economist Euben Paracuelles to be specific studied. This seemed to be evident when we try to look at the average of 300,000 vehicles that passed in EDSA alone in a daily basis. These figures would plausibly increase in a high note as it runs on all the country’s respective national roads. The demand of oil supply in our country, if to be treated in its positive aspect, can be used as one of the country’s way in providing more jobs by virtue of private gasoline stations. With no strict qualifications, Filipinos can easily gain an employment under those private gasoline stations.

           But what is existing right now is the other side of the dice. The demand of oil supply is being abused to its fullest as what is being interpreted by the article of Lawrence Agcaoili. Agcaoili used the terms of UGLY scenario, BAD scenario and GOOD scenario as his own way to elaborate the levelling of Philippine inflation in terms of percentage. Private oil producers contradict one of the vital laws either in demand or supply. It is said in the law of supply if the price goes high so as the supply goes high. Well we know that it really is transparent in oil production, we haven’t experienced oil shortage, have we? Nevertheless, the law of demand says that if the price rises, the demand falls. Is there any fall in oil demand in the Philippines even at one point? So if the demand doesn’t fall,  if I may ask so, how come the price is still high and currently going high? A rollback of 50 cents in oil products is being succeeded in a couple of weeks by a one peso price increase. If there is these PRIVATE oil producers as I called the different oil companies, could I say that it is also possible in the power given to the government to make an oil company of his own, considered that it is run by the government, it is safe to call it as a PUBLIC oil company. Upon the idea that I have proposed, considering that we have no enough or even as efficient and effective oil subsidies, I think my own version of PUBLIC Oil Company will be a great help. We know that the increase in oil prices has a domino effect to various products that we used to buy and falls under our needs. If I am in the position to initiate my version of PUBLIC oil company, then it has already been existing by this time. Not to compete but to help because I’m a consumer myself not just of oil products but merely of the products that is being affected in terms of price.