CHAPTER II
REVIEW OF RELATED LITERATURE
This chapter presents and discusses the related review literature and studies after a
thorough and in-depth search done by the researchers which are drawn from local and foreign
references found to be relevant to this study on Effects of Fuel Price Inflation Among Drivers in
Laoag City, Ilocos Norte.
FUEL PRICE INFLATON: CAUSES AND EFFECTS
Fuel is a huge impact on our daily life, especially if you have your own vehicles to drive
on that consume fuel. Fuel price inflation has been a concern for many consumers around the
world, especially during this pandemic. The price of goods and services for which fuel is used in
manufacturing is impacted, which has an indirect effect on the supply chain. The actions of
producers and the makeup of the product market will determine how much the increase in
production costs translates into higher consumer pricing (IMF, 2021). When the supply of
gasoline is less plentiful than the actual or anticipated demand for or consumption of gasoline,
gasoline prices tend to rise. If there is a disruption in crude oil supplies, refinery operations, or
gasoline pipeline deliveries, gasoline prices may vary quickly (EIA, n.d.).
War between Russia and Ukraine did a major cause on the fuel price hike since Russia is
one of the big contributors of fuel supply. Crude oil then spiked above $110–120 at times since
the February 24 invasion. Unsurprisingly (since crude is half the cost of gasoline), prices of
gasoline and diesel fuel also jumped much higher since the invasion, all around the world
(Reynolds, 2022).
According to Tuazon (2022), the shock to commodities prices is the initial effect of
increasing oil and gas prices in the Philippines. She also states that the increase in oil prices
could hamper growth in Southeast Asia, particularly in the Philippines. The impacts of fuel price
hikes in terms of microeconomic factors includes: lower purchasing power, higher cost of
commodities, changes in suggested retailed prices (SRP), and higher fares in public
transportations.
FUEL PRICE INFLATON: EFFECTS ON THE TRANSPORTATION OF GOODS AND
SERVICES AND OTHER MICROECONOMIC FACTORS
Transportation is one of the input cost of imported and exported goods and services,
which gives an indirect effect of fuel price inflation. In a report that conducted by Tuazon, 2022,
the effects of fuel price hike on the transporting of products will usually result in the following
factors: lower purchasing power, higher cost of commodities and changes in suggested retail
price (SRP).
In the factor of lower purchasing power, Tuazon (2022) stated that lowered disposable
income for that family when commodities prices are high and household income is unaffected. In
other words, a household's normal income could only buy so much stuff. For instance, you may
buy a month's worth of food and other necessities using your previous grocery budget. However,
during periods of high commodity prices, this might only translate into two weeks' worth of
supplies for the same price.
In the factor of higher cost of commodities, Tuazon (2022) found out that price increases
also translate into greater living expenses because it has been demonstrated that oil prices are
linked to those of other market commodities. Prices for meals, tickets, and other daily expenses
could increase in addition to being more expensive for the same quantity of petroleum.
In the factor of changes in suggested retail prices, Tuazon (2022) concluded that the
suggested retail prices (SRPs) of vital items shouldn't alter at this time. But in the future, it is a
possibility that cannot be ruled out.
EFFECTS OF FUEL PRICE INFLATION ON THE FARE PRICE OF PUBLIC
TRANSPORT AND GASOLINE PRICES
The increase of fare price on public transport is also a major effect of fuel price hike.
Many commuters and drivers are worried for this situational crisis that it can impact their socio –
economic status especially in financial aspect.
In an interview conducted by Gomez (2022), he found out that tricycle and jeepney
drivers are the most affected of the crisis. Gomez (2022) interviewed Jules, a tricycle driver in
Dinalupihan, Bulacan and this is the exact response that he said,
"Many lost their jobs because of the oil price hikes. We, tricycle drivers, are most
affected,"
"Life before the pandemic was already hard and became harder during the pandemic.
And then the price of fuel went up,"
"The other sad thing is even if the price of petrol went up, the fares were not adjusted
upwards,"
In that response Jules stated, we can say that fuel price inflation should not be ignored,
but we should more concern about it because a macro activity can affect a micro activity.
According to the news report of Global Petrol Prices in November 7, 2022, the gasoline
prices in the Philippines is P68.200 per litre and 258.165 per gallon.
REFERENCES
Kpodar, K. R. (2021, November 12). The Distributional Implications of the Impact of Fuel Price
Increases on Inflation. Imfsg.
https://www.elibrary.imf.org/view/journals/001/2021/271/article-A001-en.xml
Gasoline price fluctuations - U.S. Energy Information Administration (EIA). (n.d.).
https://www.eia.gov/energyexplained/gasoline/price-fluctuations.php
Reynolds, A. (2022, April 6). Yes, Russia’s War on Ukraine Did Raise the Price of Gasoline.
Cato. https://www.cato.org/blog/yes-russias-war-ukraine-did-raise-price-gasoline0#:~:text=Crude%20oil%20then%20spiked%20above,invasion%2C%20all%20around%
20the%20world.
Tuazon, M. C. J. (2022, October 24). Oil Price Hike: What It Means for the Philippine
Households and Economy? Camella Homes. https://www.camella.com.ph/oil-price-hikewhat-it-means-for-the-philippine-households-and-economy/
Gomez, E. J. (2022, September 16). Poor bear brunt of fuel price hikes. The Manila Times.
https://www.manilatimes.net/2022/09/17/business/top-business/poor-bear-brunt-of-fuelprice-hikes/1858769
Philippines gasoline prices, 07-Nov-2022. (n.d.). GlobalPetrolPrices.com.
https://www.globalpetrolprices.com/Philippines/gasoline_prices/