A MONTH AND a half after the United States waged a war against Iran, more Filipino families are seen to join the poverty cluster in view of the adverse effects of the global oil crisis, according to the Philippine Institute for Development Studies (PIDS).
In its policy note, the state think tank traced the escalated poverty to the particularly cited the prolonged severe disruption in the global oil industry as the major factor that could further worsen poverty to 15.3% to 16.3% nationally, with the rural areas potentially experiencing a level of 22.5%.
To date, crude oil in the global market is pegged at $105 per barrel — plus the 35% pass through rate imposed by Iran to oil tankers passing the Hormuz Strait.
In its estimate, the PIDS said that the country’s poverty could push 1.34 million Filipinos, mostly in near poor households into poverty.
PURCHASING POWER
Dubbed as “Who Suffers Most When Oil Prices Spike,” PIDS senior research fellow Jose Ramon Albert described the oil price shock as highly regressive, with poor households losing 16.2 percent of their real purchasing power, compared to a loss of only 3.4 percent among the richest households.
“Additionally, universal fuel subsidies exacerbate inequity, providing about four times more benefits in absolute peso terms to the wealthy than to the poor,” reads part of the PIDS Policy Note.
The Note concluded that a targeted emergency cash transfer presents a more equitable and fiscally manageable response: a P 6,000 per-household tranche (P 1,500 per individual), delivered through the vertical expansion of existing programs (like Pantawid, social pension and other pensions), horizontal expansion to waitlists, and emergency transfers to persons with disabilities, minimum-wage workers, and newly identified poor households.
This approach would reduce poverty from 16.4% to 15.8% while shielding about 754,000 individuals at an estimated cost of P 64.6 billion after deduplication.
The estimate is based on the analysis of the fuel price shock in the context of the Middle East conflict.
SEVERE SCENARIO
Should the oil price hit $125 per barrel anew, PIDS estimates the national poverty rate rising to 15.3 percent but in the most severe scenario of oil price reaching $145 per barrel, PIDS expects the poverty rate to worsen and reach 16.3 percent, Business World reported.
While all households experience roughly similar price impacts, PIDS said the price increases are likely to hurt the poor households more.
“Because poor households allocate over 57 percent of their spending to food and food supply chains are highly energy intensive, the transmission of cost increases through food prices disproportionately affects low-income households.”
For the PIDS, targeted cash transfers can help reverse the poverty impacts.
“A fuel excise tax cut that reduces prices uniformly provides roughly four times more in absolute pesos to a rich household than to a poor household. Only targeted cash transfers can reverse this regressively by directing support specifically to those least able to absorb the loss,” the PIDS said.
EQUITABLE RESPONSE
In particular, it said that the proposed Suplementaryong Ayuda Para sa Apektadong Tahanan program is seen as the most equitable and cost-effective response.
By providing P6,000 per household as an additional support for existing program beneficiaries, adding those on waitlists and providing emergency transfers for persons with disabilities and minimum wage households, PIDS said the government could protect about 754,000 Filipinos from poverty.
If the crisis persists or deepens, it said that additional assistance to households is needed.
“The challenge is to implement the program before the shock fully manifests as deeper poverty,” PIDS added.
Interestingly, Marikina City Rep. Muro Quimbo, in his capacity as chairman of the House ways and means committee, admitted that the middle class is not covered by any kind of financial assistance or dole outs the government has been giving other sectors.
“They are one major crisis away from falling below the poverty line,” Quimbo stressed.
OVERLOOKED SECTOR
It has been established that the national government derives its taxes from the middle class or the salaried workers, whose monthly incomes are automatically deducted for purposes of taxation. About 85 percent of government funds are sourced from fixed-income earners.
During the crisis, Quimbo said the government should not forget the middle class who hardly gets covered by state-sponsored financial assistance.
“In our last two LEAD joint committee meetings, one reality has become unmistakable: the true threat of this energy crisis is its creeping impact on our domestic economy,” he said.
Cagayan de Oro City Rep. Rufus Rodriguez said 45 percent of the country’s population is classified as middle class, while only 1.5 percent belong to the rich class.
“The rest are considered poor,” he said.
Quimbo presented the 2023 Family Income and Expenditure Survey conducted by the Philippine Statistics Authority showing that the level of expenses of poor and rich households for diesel and gasoline were not so disparate.
The figures showed that 12.1 percent of the income of the poorest of the poor families went to diesel and gasoline, while 14.7 percent of the richest household’s earnings was spent on fuel.
CONFLICTING CLAIMS
Quimbo cited the survey to dispute a claim by Finance Undersecretary Karl Fermin Adriano that rich Filipinos comprising a small percentage of the population account for 50 percent to 85 percent of diesel and gasoline used by households.
This is the reason why diesel and gasoline were not covered by the recommendation of the administration’s UPLIFT committee on fuel excise tax suspension, which applied only to cooking gas and kerosene.
Quimbo informed his colleagues that upon the instructions of Speaker Faustino Dy III, his panel intends to focus on measures that would help “key sectors that directly shape the daily lives of the general population.
“Petroleum products underpin key sectors—such as agriculture, transport and electricity—so price increases ripple through supply chains, raising food prices, utility costs and eroding household purchasing power,” the PIDS noted.
“For a country where more than one in eight Filipinos is poor, sustained fuel price increases pose not only a macroeconomic concern but also a welfare challenge,” it added.
The impact is expected to be uneven, with rural households likely to experience sharper increases in poverty due to their heavier reliance on fuel-intensive agriculture, limited income diversification and higher food expenditure shares.
VULNERABLE REGIONS
According to the PIDS, “impacts are regressive and geographically concentrated,” with poor households losing about 16 percent of their annual income, while wealthy households lose only around 3 percent.”
The PIDS likewise disclosed a list of regions classified as “most at risk” — the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM), Bicolandia, Mimaropa (Mindoro, Marinduque, Romblon, Palawan), the Visayas, and much of Mindanao.
According to the policy note, poor households already allocate more than 57 percent of their spending on food, making them particularly vulnerable as higher fuel costs feed into food prices.
The PIDS based its analysis on three fuel price shock scenarios developed by the Asian Development Bank, assuming average oil prices at $105, $125 and $145 per barrel.
At present, prevailing conditions are closest to the first scenario, the think tank said. Global oil prices remain above $100 per barrel, although domestic pump prices have already seen their first rollback since the war started in late February.
The Marcos administration has also suspended excise on kerosene and liquefied petroleum gas (LPG), but has kept levies on diesel and gasoline.
OIL EXCISE TAX CUTS
“A fuel excise tax cut that reduces prices uniformly provides roughly four times more in absolute pesos to a rich household than to a poor household. Only targeted cash transfers can reverse this regressivity by directing support specifically to those least able to absorb the loss,” the PIDS averred.
Instead, the think tank said cash transfers are more cost-effective and equitable, partly due to their multiplier effect.
“When low-income households receive transfers, they tend to spend most of the money immediately on food and basic goods, boosting local demand, supporting small businesses and sustaining jobs,” the PIDS said, noting that each peso spent can generate between P1.5 and P2.8 in economic output.
“In times of shocks like a fuel crisis, this helps cushion the downturn, shorten the recovery period, and even support government revenues, making social protection both a social and economic response,” it added.
Rising fuel costs and subsequent transport fare hikes in the Philippines, driven by the 2026 Middle East conflict, are projected to push an additional 1.34 million to 3.1 million Filipinos into poverty, reversing previous poverty reduction gains.