Tuesday, July 1, 2008
Endless price increases
Philippine government called on the people to remain calm even as local oil firms raised their pump prices without end. I only learned now, that these increases will continue up to July 12 to recoup under-recoveries for the month of May. Wow!!!
Of course, as we all know, these problems are global. And as a global problem we can’t avoid it, as Presidential Management Staff Director General Cerge Remonde stated in an interview a couple of days ago. So far so good. Fact is , that more and more people are really getting furious these days because of the rising prices. Apart from oil we have been also hit by high prices of rice, canned food and all other food items.
Incomes are not going up - and, all governments have been forced to come with some measures to ease the consumers’ burdens. Let’s talk about rice, education, electricity… . How about the transport groups?
My two brothers-in-law are operating a taxi. They can feel the lower income day by day. They, and not only they, support Efren de Luna, President of the Alliance of Concerned Transport Operators, who stressed the need for the government to undertake the 2 Pesos fuel subsidy and other aids. Many drivers and their families are really in deep crises now.
The Bagong Alyansang Makabayab announced to continue the protests against what it described as inaction of the government on high oil prices. Will it help? Today I observed the litre price of gas almost reaced 61 Pesos. Wow, that’s almost one EURO... . Protests in the Philippines
What do you think? Where is the end of the tunnel? And how? And when?”
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# 1 chris said:
Let’s face it, the Philippines government, on its own, can do very little to mitigate these price increases. What it shouldn’t do is remove EVAT on fuel, because doing so simply will cause demand to increase as people hoard, and government revenues to decrease. For the moment, the world is stuck in a spiralling-cost cycle. Perhaps the Philippines can join with other Asian countries in developing ways to increase agricultural output, but these require years of research to develop! Shame that during the past few years, when times were good (relatively speaking), this was not considered.
# 2 Ron W said:
hello klaus
here in the island i live,maine state usa the gas price is 6,25 and diesel is 6.50 i dont know whats gonna happen here if things dont get better
salamat klaus
# 3 Peter Mystakas said:
There is no doubt that the Opec Nations are regulating the supply of oil and basically charging what the customer can bear.
With Chinese and Indian demand for oil shooting through the roof and I suspect the USA is stock piling oil, then i feel there will be more pain at the bowser. As with the knock on effect, prices of commodities will rise and will make everything more expensive.
The move to Ethanol fuel is a poor choice as an alternative fuel as more land will be used to grow crops for fueling cars. Therefore there will be less acreage for food production.
In Australia, we are supposedly 80% self sufficient in oil reserves, yet the prices here are rising constantly making more and more people miserable. With rising fuel costs, it basically means people are losing their freedom.
The worlds hunger for oil will only fuel ( pun intended ) further rising prices unless we can reduce our dependence on the black liquid gold.
# 4 David S. said:
I wouldn’t write off ethanol production so quickly. There are processes like Cellulosic Ethanol that utilize waste plant material to produce ethanol. Food plants like sugarcane and corn aren’t needed. Unfortunately to develop these processes, incentives from the government would be required. I have my doubts the government is nimble enough to provide them.
# 5 Dr. Sponk Long said:
Hi Klaus. Too much money chasing few goods. Then little money with few goods. Then little money with more goods.It’s only at the latter stage that prices will eventually go down.
The world needs an economic recession badly.
One thing for sure, rising prices has now started demand destruction….it wil be painful for everybody except for the filthy rich.
# 6 Chas said:
Hi Klaus,A subject everyone is talking about,rising prices.I have to agree with Dr Sponk Long it will get worse before it gets better.I can only comment from a western angle at present.In the west it will bring people back to their senses,instead of Spend/ borrow/ spend/borrow culture that has existed in the West for nearly 2 decades,it had to end in disaster.Everything has been so cheap,much has been wasted in our throw away culture.If you take food as example,Billions of dollars of food is thrown out every year coz people buy more than they need,they forget what is at the bottom of the freezer,back of cupboards etc, use by date expires,bin it,in a world where half the world is starving,doesn’t make sense.Biofuels is not the answer to the oil crisis,i feel that was a panic decision,(biofuel growers are subsidized by govts in the west) it deprives land that use to grow food,the speculators saw this coming and jumped on the bandwagon pushing up food prices further.The future is electric and hydrogen cars.BMW have perfected hydrogren cars,Nissan recently announced its trials also,(no pollution from hydrogen neither).We just have to overcome storage problems at gas stations.Oil will never be cheap again,demand will become greater than supply, if demand does not drop.New oil fields are difficult to come by,even when found it takes time to get into production.New finds are generally in very difficult places like Siberia,so the costs to recover the oil are huge.We have to change our habits as oil is predicted to run out completely in the next 30yrs.However,i recently heard analysts predicting oil prices to continue rising until later in the year when they expect it to drop back to @$100 barrel.Also the Iraqi govt is working on trebling output as the country stabelizes (is that what the war was about?).Well thats all my news for now,regards Chas.
# 7 Chas said:
Hi Klaus,Just heard half the taxi drivers in Bangkok cannot work as there is a shortage of LPG in Thailand,most taxis their had converted to LPG.This gave me a thought,for tropical countries,i wonder if someone could not perfect solar powered cars with solar panels on the roof,free motoring,regards Chas.
# 8 cidz said:
I pity those who only earned below minimum wage… And for sure crime rate will increase..ouch!
# 9 klaus said:
Hi Chris, thanks for leaving your comment. I strongly agree agree with you: especially also with your last sentence. And that happened not only in the Philippines - also in other countries.
# 10 klaus said:
Hi Ron W, btw I stayed in your place 1975 before leaving to Canada. It’s really a wonderful place. WOW, you have already gas prices like this???
Yeah, you are indeed right: we don’t know what gonna happened in future. I just learned from one of my German friends: 1,65 EURO per litre… 
# 11 klaus said:
Hi Peter Mystakas, thanks for your very enlightening comment. It’s very clear, that the OPEC is testing our ‘pain limits’. We all will feel indeed more pain on the bowser. I am also no fan of ETHANOL fuel, because we will continue wasting plants, which are also important parts of the daily food in many countries. I also haven’t know about your example (80%, Australia). thanks for sharing it with us…
# 12 klaus said:
Hi David S., thanks for stopping by. Sad to say: but you are so very right with your comment…
# 13 klaus said:
Hi Dr. Sponk Long, your comments are indeed right - and painful. You mention a worldwide recession. Right now I try to avoid any imagination like this. I still have in mind thoughts of my late grandmother, who talked about a 3rd World War (?), increasing of nature catastrophes or riots (civil wars) because of ‘gambling with our natural resources’. I just tried to translate her words in correct English and today I wonder, how she could say that already 20 years ago…
# 14 klaus said:
Hi Chas - how very true it is what you are telling all of us. If I am not mistaken, you are located in Norway right now, isn’t it? I still remember the “borrow-spend-borrow-spend-situation” in Germany (before 1999) as well in most countries of the EU. Food has been throwing away to keep the prices high. Our hearts were bleeding many times.. i don’t know, if and when it will people bring back to their senses. The half of the world is indeed already starving. Thanks for your additional information, Chas, regarding the taxi drivers in Bangkok. It’s true - and has been also reported from other Asian countries. My brothers-in-law tried to “change our taxis to LPG”. They gave up calculating the costs and an eventually ‘higher’ income…
# 15 klaus said:
Hi Cidz, unfortunately you are telling the truths. thanks for stopping by.
# 16 Martin said:
Hi Klaus,
Prices do keep rising lockstep with oil. I run a small business, and today we finally raised our prices too. While our inputs have been rising for the past 8 to 10 months, we have held off raising prices. We do this as a business decision. We appreciate our customers’ patronage and we always make sure we’re the last to raise prices. I think our customers appreciate it. Not all merchants can do the same because each business has different pricing strategies and margins, but I do think it is better in the longrun to help your customers as prices rise and not take advantage of them like some companies do.
# 17 Bob said:
Hi Martin - When all of the input costs are rising steadily, I don’t think that it is “taking advantage” of your customers if you raise your prices. Basically, I would consider it a matter of survival. In my experience in business, if you provide excellent service, excellent products, and all around excellence for your customers, price is only a marginal consideration. Unfortunately, these days, with the raising prices like Klaus is writing about, we have little choice but to increase our sales prices. Just my Peso or two worth of comment.
# 18 Martin said:
Hi Bob,
I agree, and I too have no qualms raising my prices when different factors of production go up. I do however think it is good practice to help customers adjust to new prices by raising prices only after you know exactly how input changes affect your bottom line.
I (and others I am sure) have come across unscrupulous merchants who use inflation as a means of gouging customers. For example, I have friends in business who have been charged ‘new prices’ even though they have been given old stock that was bought previously at much lower prices. Rather than selling old stock at the old prices, they gouge consumers by changing the sticker price to reflect the latest prices. It is true that oil prices will continue to drive costs up for most businesses, but lets hope most businesses refrain from taking advantage of the situation.
# 19 Bob said:
Hi Martin - Just my opinion, but in the case of charging the “new” price for the “old” stock, I don’t see a problem with that. But, the merchant must use the same strategy at all times. For example, on rice, if the rice goes from 30 to 35, I see no problem raising the price of all your stock. However, when the price adjustment has gone full swing and the price lowers from 35 back to 30, charge the new price on the old stock then too. That all equals out, and is fair to both the merchant and the consumer, IMHO.
# 20 Dr. Sponk Long said:
Hi Klaus. Your grandmother was correct and very wise indeed. Scarcity of goods leads to war and numerous conflicts.
This time though I don’t think there is and absolute scarcity of goods. I think the increase in the availability of money throughout the world is the culprit. This all started in the early 1980’s when the boom of mutual funds began. There is too much money needing to be invested.
Right now Wall Street is waiting for the European Central Bank (ECB) decision to raise (or not) interest rates. I think the ECB has been very decisive but the U.S Federal Reserve is caught between making the economy strong or reigning in inflation.
Again, the world has got itself into a big hurry. It needs to slow down.
For me, raising interest rates is the answer.
# 21 Martin said:
Hi Bob,
I can see how all seems fair, but in practice, all of my suppliers warn me of upcoming price increases, and they encourage me to buy any remaining stock before their new shipments come in to aviod paying the new, higher price level.
I have never encountered a supplier who offered me a lower price for stock they paid a premium for. They simply wait until the stock is sold before offering a new ’sale’ or ‘promotional’ price that is lower for new stock that may have come down in price. This loweing of prices I should note, has only happened when my supplier was facing new or intense competition from a rival wanting to gain market share.
So in the end, it is up to the merchant who offers the final product to the end consumer. They can either pass on any savings and build the relationship with their customers or pocket the surplus and hope the buyer isn’t put off. It’s a complicated issue, because the latter strategy can erode your customer base if it causes people to switch to a new supplier.
# 22 MarcelinaWW said:
Hi Klaus, Here’s my two cents worth…
Re: Bob and Martin-
Having operated a small retail business myself, I understand matching the price of old stock with the new price. I guess it depends on the business you’re in. If consumable, perishable, etc I agree to sell them as quickly as they can be sold. On the other hand, if non perishable, gift items, books, etc, you can always give a small discount right at the counter which is much appreciated by customers. People love surprises!
Cheers!
Cheers!
# 23 Bob said:
Hi MarcelinaWW - I fully agree with your strategy!
# 24 Klaus said:
Hi Martin and Bob, thanks a lot for your comments and the very helpful discussion. You are both right in your own opinion. That’s how to find the middle path by trying to survive as business people.
# 25 Klaus said:
Hi Dr. Sponk Long, thanks for your compliment. Yeah, my grandma (born 1899!) was really amazing. Living a really poor life in the former East Germany she taught me a lot of knowledge. - Anyway, if I am not mistake: the ECB raised already the interest rate. That’s why the EURO showed heavy losses last night. You are right, the world needs to slow down…
# 26 Klaus said:
Hi MarcelinaWW, thanks for your two cents worth… I only can repaet Bob’s comment…
# 27 Daniel said:
It is very strange today that some nice ideas are not picked up. Instead they make the stuff much worse. Ex: food to ethanol thus exploding food prices.
My idea is to use bio degradable stuff for creating bio gas. This is by putting the bio degradable trash in a fermenter to create gas. Several farmers in my country are now using such fermenters to create own gas and with the gas they can produce electrical power and can make hot water and heating their houses. And with a car that runs with CNG (Compressed natural gas) they could fill its tanks as well. And the remainings after finishing the fermenting can be reused on the fields.
Even the foul mud from the sewage plant and the left over food from hotels, restaurants and more can be used in the fermenters to build gas.
# 28 Klaus said:
Hi Daniel, I am not such an expert then you. if your idea would work, everybody should give it a try. Thanks a lot for sharing it with us…
# 29 Daniel said:
Here is a biogas plant design that can be quite easy adapted for the Philippines: http://www.dae.gov.in/ni/ninov02/biogas.htm
# 30 Klaus said:
Hi Daniel, that’s great. I visited already the site. I hope many others will do it - and adopt it. Thanks for sharing it with us…
# 31 Preben said:
Hi Klaus.
I do not see the relevans of pointing out that one liter cost allmost the same as one EURO. As you properly know one liter of gas cost app. 1,5 EURO, or even more in most european countries and besides that we have to pay heavy road-tax, tax on the car,tax on the insurance,tax on the drivers-licence.
The worst is to hear an american whining of gasprices, wich are still app. half of the price in europe, and their consumption is indeed outracious. They should all be ashamed, and not behave like spoiled bratts.
When it comes to the transportation in RP, things are much different, since the earning allready is low, or very low and I really feel sorry for these people.
If one want to compare prices one what ever goods, it should be done against the cost of living, against the average household income or against what it was 2-3-4-5-6 month ago, that will make sense.
Just my opinion.
PS. Feel sorry for you and your family, and pray for the right outcome of your legal battle, with the neighbor.
# 32 Bob said:
Preben - Your statement about Americans is such a generalization and so sweeping. Are all Europeans exactly the same as each other? No? Well, neither are all Americans.
# 33 klaus said:
Hi Preben, thanks for your concern re my personal problem. - Thanks also for your comment. I think, that meanwhile more then one EURO gas prize IN THE PHILIPPINES is for millions of Filipinos more then painful.
Hi Bob, THANKS for your comment…
# 34 Preben said:
Hi Bob.
Yes it is a generalization, and offcourse all are not the same nor in the US nor in europe.
My point is that an american still only pay half of what it cost in Europe.
Compare the gasprice up against the cost of living in US, you will find it is still very cheap compare to what it is in europe.
Yes it is getting more and more expensive, but that goes for most of the world.
Hi Klaus.
I agree to your comment, and I really hope that gasoline will never reach the equevalent to 1,5 euro in RP.
The difference is that in a 1 world country we pay the extra price out of what we have extra, but in a 3 world they must take it out of what they allready have too little.
# 35 Klaus said:
Hi Preben, thanks for your additional comment…
# 36 Bob said:
Preben - It is not the fault of Americans that the European governments tax oil products so highly. Maybe the thing that should make you sick is what your government is doing, not Americans.
Please note that when speaking about Americans you said “They should all be ashamed and not act like brats.” All? Yet, in your later comments you said that it doesn’t apply to ALL. Which is correct?