Surging crude oil prices worry BSP

The latest spike in oil price resulting from the standoff between Europe and oil-producer Iran has caught the attention of the Bangko Sentral ng Pilipinas, which acknowledged that the Dubai crude price has breached its assumption for the year.

BSP Deputy Governor Diwa Guinigundo said that when the central bank set its inflation target of 3 to 5 percent for this year and next, it assumed that Dubai crude would average between $90 and $110 a barrel.

Dubai crude, however, has been hovering close to $120 a barrel over the last few days and hit $118 Wednesday as the dispute between Europe and Iran over the latter’s alleged nuclear program caused market players to be concerned over potential disruptions in oil supply in the months ahead.

European Union officials have imposed a ban on oil imports from Iran starting July as a means to pressure the Middle Eastern country to stop its alleged nuclear program. Iran, estimated to account for about 4 percent of global oil supply, has denied making any nuclear weapons.

The Philippines is an oil import-dependent country, buying about 90 percent of its requirements from abroad. An increase in Dubai crude price pushes local pump prices and the cost of other basic commodities.

“Recent developments have seen oil prices shooting up precipitously. The European prospective ban of oil imports from Iran has fueled concerns about possible retaliation in terms of supply disruption,” BSP Deputy Governor Diwa Guinigundo said.

He said the BSP is keenly monitoring oil-price developments offshore as it works on ensuring inflation is kept within the target for this year.

The BSP, which cut policy rates earlier this year, had said that it maintained a policy of supporting economic growth as long as inflation was kept within target.

Guinigundo said that so far, the BSP still expected inflation to stay within the 3-5 percent target, but that developments abroad were being monitored.—Michelle V. Remo