“The Increase in Gasoline Price”

Introduction

A sustained increase in the general price level of goods and services in an

economy over a period of time. When the price level rises, each unit of currency buys
fewer goods and services; consequently, inflation reflects a reduction in the purchasing
power per unit of money – a loss of real value in the medium of exchange and unit of
account within the economy. Inflation affects everything around us, from basic
necessities like housing, food, medical care and utilities to the cost of cosmetics and
new automobiles. Furthermore, inflation deteriorate our savings. It makes the money
saved today less valuable tomorrow, destroy our future purchasing power.
According to Ej Lopez, inflation is generally measured in percentage; say a 10
percent inflation rate makes a price of a can of sardines, which previously cause 10
pesos, to rise to 11 pesos. Inflation rate is a measure of changing prices, typically
calculated on a month-to-month and year-to-year basis and expressed as a percentage.
The fact that even a small increase in the price of a basic commodity, such as fuel for
instance, may have a domino effect bother goods in a monitored basket.
Compounding the misery is the fact that the consumer’s purchasing power is
depressed by the increase in price levels. This situation makes people’s lives worse
instead of better. The cliché that the only thing you can’t escape in this world death and
taxes should be modified to include inflation. Moreover, inflation is hard on people but
particularly harder on those who are fixed-income earners, like most of us who live on a
day-to-day basis.
There are ways on how to measure inflation. First, is the Price Index Level. It
expresses the level of prices of goods traded in economy at the same time. It is also
calculated for particular market basket for examined periods.
Second,the Consumer Price Index is a price index that tracks the prices of a
specified basket of consumer goods and services, providing a measure of inflation.
 Philippines Gasoline Prices
There are many factors, apart from the price of crude oil, that also affect the price
of retail gasoline. These include, but are limited to: transportation costs incurred to
deliver gasoline to retail outlets, refining and marketing costs and margins, inventory
levels and local supply problems. Higher demand, particularly in the summer months,
can also drive up prices. Any of these factors can result in temporary fluctuations or
regional differences.
Much of the volatility in gasoline prices in recent months has been the result of
the steady increase in crude oil prices. Crude oil prices have nearly doubled in the last
year, an increase equivalent to about 35 cents per litre. While the cost of crude oil
prices are the single most important factor behind recent increases in petroleum product
prices.

Gasoline Prices in Philippines increased to 0.98 USD/Liter in November from

0.95 USD/Liter in October of 2017. Gasoline Prices in Philippines averaged 0.91
USD/Liter from 1990 until 2017, reaching an all-time high of 1.29 USD/Liter in March of
2013 and a record low of 0.34 USD/Liter in December of 1995.
The Philippine Statistics Authority said headline inflation December rose to 3.3
percent year-on-year, similar to the rate posted in November but higher than the 2.6
percent recorded a year ago.

Philippine Consumer Last Previous Highest Lowest

Gasoline Prices 0.98 0.95 1.29 0.34

 Actual Previous Highest Lowest Dates Unit Frequency

0.98 0.95 1.29 0.34 1990-2017 USD.Liter Monthly

Gasoline Prices in the Philippines

CAUSES

 High Crude Oil Prices.

It is because oil costs account for 72% of the price of gasoline. The
remaining 28% comes from distribution, refining and
taxes, which are more stable. When oil price rise you
can expect to see it at the gas pump 6 weeks later
 Value of the Dollar declines.
This is because all oil contracts are all denominated in dollars. That’s why
all oil prices rose between 2002 and 2004. The dollar lost 40% of its value
during that time. Oil prices fell in 2015 and 2016. That’s because a strong
dollar allowed OPEC Members to make more money while keeping supply
constant.
 Commodities Traders
They buy oil in gasoline at the commodities futures market. Those markets
allow companies to buy contracts of gasoline for future delivery at an
agreed-upon price. But most traders have no intention of taking ownership
of the gasoline. They plan to sell the contract for a profit, instead.
 Supply and Demand in Gasoline
Natural gas prices are mainly a function of market supply and demand. It
is because there are limited short-term alternatives to natural gas as a fuel
for heating and electricity generation during peak demand periods,
changes in supply or demand over a short period may result in large price
changes or inflation. Prices themselves often act to balance supply and
demand.
 Seasonal and annual variation in supply and price.
Gasoline may be less expensive during summers when supplies are
plentiful compared with other summers when supplies are not. Prices for
all commodities fluctuate, but gasoline prices are generally more volatile.
For example, consumers generally have options when it comes to food so
they can substitute other food items when prices change, but most
consumers do not have other options for fueling their vehicles.
EFFECTS

 Automakers spend less.

This is one way that rising gas prices can have a negative multiplier effect
on the broader economy. In the past, as consumers cut back on durable
goods purchases-and on domestic automobiles in particular—that forced
other country automakers to cut back their own spending and lay off some
of their workers.
 Increase of fare in public transportation.
As fuel prices continues spiraling, the added cost are a significant concern
for transportation officials. If an increase in gas prices leads to a rise in a
transit ridership then fare revenue would increase, and the added fuel cost
for the transit operator would at least be partly offset.
 Consumer adjust.
Changes in consumer behavior can take the sting out of rising gas prices
and help keep confidence. People try to drive less when gas costs more,
but the bigger effects are the ones that occur over longer periods of time,
such as buying a more efficient car or moving to reduce the expense of
commuting.