SANTILLAN, NEOMARK T.
BS ACCOUNTANCY III
CERTIFIED FINANCIAL MARKETS PROFESSIONAL
Global external events typically affect, not just influence, how both financial and the
commodities markets behave and fluctuate. With the current Russia-Ukraine dispute and invasion,
petroleum industry is the primary industry directly affected which in turn indirectly affect
consumers’ necessities and needs as prices on these commodities as well fluctuate relative to the
movement of global oil prices leading to the general increase in prices – hence, inflation. In the
news digest, we can pinpoint key players in the shaping up of the world’s commodities markets
which successively affect consumers and the financial institutions in the country.
A. The Domino Effect of Oil Industry Disruption
Russia being one of the world’s leading oil producers in fact, ranking second as of 2022
(Trading Economics, 2022), with the current Russian invasion to Ukraine, oil industry is
immensely affected. This turn of world events directly disrupting the oil industry surely drive the
world market price for oil up. So, why does this matter? Simply because of logic. None of the basic
commodities in the market “actually walk its way to reach the market”. Meaning, all goods in the
market are using oil fueled transport. Basically, these incremental costs are to be recovered by the
suppliers from the consumers by way as additions to prime costs of the goods manufactured which
is what is happening to the country today where general prices of commodities went up
significantly. Therefore, as oil prices went up, everything else’s prices will follow relatively.
B. Major Global Players Can Influence Market Behavior
With Russia’s standing as the second most leading producer of oil (Trading Economics,
2022), it can potentially influence how petroleum industry behave and fluctuate. As of now, on
Russian dispute on invading Ukraine, global flow of exchange on oil and other financial and capital
export-import relation is disrupted. Being able to control oil production and supply since oil can
modernly be classified as a necessity, world’s oil supply shrinks while demand is still at its normal
peak. Using the concept of Law of Supply and Demand in Economics, as supply decreases and
demand stays the same, the price will go up. Thus, the moment they are “cut off” from the global
market, market participants will surely bid for the supply. This event will lead to the general
increase of prices in our local markets. With that said, though the Philippines is far from where
war is located still, we are affected thru the effects of the rising oil prices in the world market to
our basic needs attributing inflation, lowering peso’s purchasing power.
C. Imposed Financial Sanctions to Russia Limits Global Transactions
Global Organization, in respond to the ongoing war between Russia and Ukraine, imposed
sanctions to the invading country (Russia) thru “financially cutting off” the nation to the world’s
financial system such as barring some Russian banks from SWIFT and freezing assets of highranking Kremlin officials, including that of Putin (DiPippo & Reynolds, 2022). These sanctions
imposed limits the capacity of Russia to transact globally – exports and imports. This means that
the capacity of Russia to transact globally will be so limited as they are barred to be supplied with
certain currencies like dollar, euro, etc. This will hit oil supply to shrink, same demand, driving
prices up since they cannot transact with the rest of the world – even in the Philippines. This is
because dollar is the most widely used currency around the world and that Russian ruble is not on
the Bangko Sentral ng Pilipinas statistics of accepted currencies (Bangko Sentral ng Pilipinas,
2020). This means that Russian ruble should be first converted to dollars before being accepted in
the country which is unlikely to happen as of now due to the tranche of sanctions imposed by the
US and Allies. With this limit and global shift, financial institutions in the Philippines will be
affected due to potential emergence of inflation which our financial system should keep up in
mitigating its effect to the consumers thru various measures it needs to self-impose.
D. Inflation Will Likely Follow
With all that is happening as oil prices significantly went up, the general prices of the basket
of goods in the commodities market as well move up relatively. This what was happening is the
very essence and the very definition of inflation. This is a result; however, I believe this is not the
very end of the impact of the global dispute that is affecting world market. So far, gasoline prices
have increased by P8.75 per liter, diesel by P10.85 per liter and kerosene prices by P9.55 per liter
(PhilStar Global, 2022). Prices of commodities will also be expected to rise because all the goods
are using energy in either production or transport or both. The Philippine financial system is bound
to potentially experience inflation if oil prices continue to rise at this significant rate. Capital
markets are also affected because inflation is one of the risks that are considered and accounted
for in the calculation of how much investors expect their investments grow. Thus, in the
Philippines, the Bangko Sentral ng Pilipinas is to implement measures to mitigate the effects of
inflation and as part of its function which is price and financial stability (The BSP: Paying The
Price For Stability).
E. People Will Potentially Demand Wage Increase in Response to Inflation
As the final response to the emerging inflation, people will be most likely to demand for
wage increase to compensate and address increase in the prices of the necessities. It would take no
economists or expert in the field to know that people will demand for the increase in their wages
because their earnings will not be enough. This will surely happen in the Philippines when inflation
stepped in as a response in the rapid and significant increase in oil prices as a major contributor.
References
Bangko Sentral ng Pilipinas. (2020). Retrieved from Statistics - Statistics Metadata Search:
https://www.bsp.gov.ph/SitePages/Statistics/StatisticsMetadataDisp.aspx?ItemId=33#:~:t
ext=The%20RERB%20contains%20the%20official,%2C%20Saudi%20Rial%2C%20Bru
nei%20Dollar%2C
DiPippo, G., & Reynolds, M. (2022, March 2). Santions in Response to Russia's Invasion of
Ukraine. Retrieved from Center for Strategic & International Studies:
https://www.csis.org/analysis/sanctions-response-russias-invasion-ukraine
Liz, M. (2022, March 5). Bond Traders Track Oil as Rising Inflation Bets Muddy Fed's Job.
Bloomberg.
PhilStar
Global.
(2022,
February
27).
Retrieved
from
Philstar.com:
https://www.philstar.com/headlines/2022/02/27/2163670/oil-prices-go-9th-straight-week
The
BSP:
Paying
The
Price
For
Stability.
(n.d.).
Retrieved
https://www.bsp.gov.ph/Media_and_Research/Primers%20Faqs/Stability.pdf
Trading
Economics.
(2022).
Retrieved
from
Crude
https://tradingeconomics.com/country-list/crude-oil-production
Oil
from
Production:
Turo, F., & Sumio, I. (2022, March 4). BOJ Sees Oil Surge Pushing Prices Beyond Forecast,
Sources Say. Bloomberg.