FOOD CRISIS LOOMS: Fuel pain could reach your plate

By Joseph Bernard A. Marzan

The country’s ongoing fuel crisis, driven by the escalating conflict in the Middle East, could eventually develop into a food crisis, a scholar from the Philippine Institute for Development Studies warned.

The risk comes as disruptions in and around the Strait of Hormuz continue to pressure global oil markets, with the waterway remaining one of the world’s most critical oil transit chokepoints.

In March, The Economist ranked the Philippines 12th among 15 emerging markets expected to be most affected by the oil shock linked to reduced access through the Strait of Hormuz.

The Philippines’ ranking was based on several factors, including net oil and gas imports equivalent to 3.55% of gross domestic product, remittances from Gulf states equal to 2.55% of GDP, the Middle East accounting for 25.6% of total oil and gas imports, and foreign exchange reserves equivalent to 7.3 months of imports.

Compared with higher-risk countries such as Jordan, Pakistan and Egypt, however, the Philippines was assessed as having relatively low exposure and a stronger buffer, placing it below India and above Indonesia and Turkey.

The Middle Eastern countries included in the import tally were Saudi Arabia, the United Arab Emirates, Iraq, Kuwait, Qatar, Bahrain, Oman and Iran.

The data cited in the analysis came from the United Nations, the International Monetary Fund and national statistics agencies.

PIDS Senior Research Fellow Dr. Adoracion Navarro said in an interview with ABS-CBN News Channel on Monday, April 13, that small businesses, including those in the retail sector, should eventually be covered by government interventions to reduce broader economic risks.

She warned that food businesses, which depend on fuel for production and the transport of raw materials and finished goods, could be hit by cash flow compression.

Cash flow compression refers to the narrowing gap between cash inflows and outflows, which reduces liquidity and is often caused by rising costs, delayed receivables or heavy debt payments.

Navarro said this could eventually lead to demand erosion, or a cyclical decline in consumer demand for goods and services.

She said government support for small businesses may need to be extended by April or May if prices remain elevated.

“The transmission [of the risk] to the food sector will really happen, but it can be delayed. The impact can be smoothed out somewhat,” Navarro said.

“Businesses are relying heavily on fuel for their production [and] logistics, and the negative impacts will be through cash flow compression. Their working capital will be strained, and eventually, demand erosion, as the consuming public’s purchasing power gets eroded,” she added.