Rising Oil Prices Threaten to Push 1.34 Million Filipinos into Poverty, Study Warns
A new policy note from the Philippine Institute for Development Studies (PIDS) has issued a stark warning: escalating global oil prices could force approximately 1.34 million Filipinos into poverty. This projection is based on a simulation of current oil price conditions, highlighting the severe economic vulnerabilities faced by many households in the country.
Current Scenario and Poverty Rate Increase
The study's "current scenario" assumes oil prices at US$105 per barrel, with a 35 percent pass-through to domestic prices. Under this setup, the national poverty rate is expected to rise from 13.2 percent in 2025 to 14.4 percent. This increase would reverse recent gains in poverty reduction, underscoring the fragility of economic progress in the face of external shocks.
Separate PIDS research reveals that about 30 percent of Filipino households are vulnerable to falling into poverty, including segments of the middle class. This data emphasizes how large portions of the population remain exposed to economic disruptions, with the current oil price surge presenting a more immediate and pressing risk.
Disproportionate Impact on Vulnerable Groups
Jose Ramon G. Albert, a senior research fellow at PIDS, explained that while the impact cuts across all income groups, it is not distributed evenly. "The impact is not evenly distributed...the most affected—even if the effect in peso terms is small—are the poor," he stated. Higher-income households may lose more in peso terms, but poorer families bear a heavier burden because they spend most of their income on essentials and have little to no savings.
Albert further noted, "The poor become poorer. But those near the poverty line are more affected—they are the ones who will fall." The study estimates that poor households could lose up to 16.2 percent of their annual income in real purchasing power, compared to only 3.4 percent among the richest households.
Rural Areas and Basic Goods Affected
The impact is particularly strong in rural areas, where poverty is projected to rise from 18.5 percent to 20 percent, compared to an increase from 8.7 percent to 9.6 percent in urban areas under the same scenario. Rural families often depend on farming and other fuel-intensive activities, have fewer income-earning opportunities, and spend a larger share of their budget on food.
Even households without cars or direct fuel expenses are affected, as rising oil prices drive up the cost of basic goods. "When oil prices increase, the prices of rice, fish, meat, vegetables—all basic necessities—also rise," Albert emphasized. Regions already struggling with poverty, such as the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM), the Visayas, Bicol, Mimaropa, and parts of Mindanao, are expected to be hit the hardest.
Worst-Case Scenarios and Policy Responses
Beyond the current scenario, the analysis outlines potential outcomes if the crisis worsens. If oil prices climb to US$125 per barrel, up to 2.35 million Filipinos could fall into poverty. At US$145 per barrel, this number could reach 3.50 million, with sharper increases in rural areas. The projections indicate that the longer and deeper the shock, the more it pulls vulnerable households into poverty and widens inequality.
Given these uneven impacts, the policy note examined different policy responses. It finds that blanket fuel subsidies tend to benefit higher-income households more, as they consume more fuel. In contrast, directing support toward poorer and near-poor households—those least able to absorb rising costs—is more effective in addressing the distributional impact of the shock.
Potential target groups for such support include:
- 4 million households already identified in social protection systems
- 1.6 million eligible but currently uncovered families
- Approximately 6.5 million vulnerable households outside existing lists, such as minimum-wage workers, persons with disabilities, and newly identified poor households
Long-Term Risks and Call for Action
Albert warned that without timely and targeted intervention, the long-term effects could deepen. "If vulnerable groups suddenly fall into poverty, that will become a bigger problem for us in the future," he said. The projections point to a clear risk: as fuel prices rise, poverty does not just increase—it spreads, pulling vulnerable families down and making recovery more difficult the longer the crisis persists.
This study serves as a critical reminder of the need for proactive measures to shield the most at-risk populations from economic shocks, ensuring that progress in poverty reduction is not undone by volatile global markets.
