Weak global demand and the abundance of US shale oil have impacted on prices of the commodity also called black gold, dragging its cost down to five-year lows.
There are interpretations that the drop in oil prices is a result of lower global growth projections in Europe, China and Japan, Bank of the Philippine Islands economist Emilio Neri Jr. told GMA News Online on Tuesday.
As a result, demand has slowed down, Neri noted.
The Organization of the Petroleum Exporting Countries (OPEC) met last week and failed to decide on how to manage plunging oil prices, the economist noted.
OPEC groups Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela.
If the group decides to trim production, oil prices may go steady if not higher, Neri said.
Some oil-producing countries may refuse to cut output because they don't want a decrease in oil revenues, Victor Abola, professor of economics at the University of Asia and the Pacific (UA&) told GMA News Online in a separate interview.
He said oil-producing countries are still observing if they can shoulder a cut in output.
Neri noted the fall in oil prices can also be attributed due to the US shale oil supply.
Saudi Arabia's oil minister told fellow OPEC members they must combat the US shale oil boom, arguing against cutting crude output in order to depress prices and undermine the profitability of North American producers, Reuters reported.
"Dahil meron ng alternative source, nag-mura na 'yung existing source," Neri said.
Pros and con
The fall in oil prices poses risks as well, he said.
"Malaking risk is pagnasanay na ang mga tao sa mababang price, may tendency na magagalit sila kapag tumaas na ulit," Neri added.
Still consumers would benefit greatly from what is happening now because they would be able to spend on other items as they spend less on petroleum products, the economist noted.
He said it will also help the country save on dollars. Oil companies use dollar to purchase oil in the world market.
"There is a pressure for the peso to recover," Neri said.
UA&P's Abola noted the lower the oil prices, the better for the Philippines as an oil-importing country.
He said this will bring down the inflation rate.
The Philippine Statistics Authority reported early last month that inflation in October eased further to 4.3 percent from 4.4 percent in September on lower prices of food and non-alcoholic beverages.
Abola also noted this might be a good time for oil companies to move out of the Pandacan oil depot.
Lower oil prices may offset the higher transportation cost of oil companies if they get their petroleum products directly from refineries then delivered to gasoline stations.
The Supreme Court on Nov. 25 ordered the relocation of the Pandacan oil depot which houses the oil storage facilities of the Chevron, Shell and Petron.
Data from the Department of Energy showed prices of diesel were rolled back 30 times since January, while gasoline were rolled back 24 times so far this year.
US benchmark West Texas Intermediate closed Monday $2.85 up from Friday's settle price, after initially sinking as low as $63.72, a level last seen in July 2009. In London, Brent gained $2.39 after earlier falling to an October 2009 low of $67.53, Reuters reported.
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