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Expensive Fuel Hurts So Bad, When Do You Say Enough is Enough?

That's demand inelasticity in economics.
by Arianne Merez
Jun 21, 2022
Jeepneys wait for passengers in San Pedro City, Laguna, June 21, 2022. Soaring fuel prices have hurt the income of many jeepney drivers.
Photo/s: Arianne Merez
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Romeo Mayor's jeep is empty on morning rush hour as the rising cost of fuel and other commodities force many commuters to either jockey for free seats in government-subsidized shuttle buses or negotiate a remote work arrangement with their bosses.

Still, the 68-year-old is sticking to the only job he knows how to do, even if the only way to keep his work machine running is fuel, which is dangerously edging towards a record P100 per liter. Since his diesel budget doubled to P2,000, Mayor's take-home pay has been slashed to P300 per day or below minimum wage.

"Wala, talagang tiyaga lang. Wala eh, walang ibang hanapbuhay," said the widower who ferries passengers between San Pedro and Calamba, south of the capital. "Halos pang-krudo lang yung aming binabiyahe , minsan abono pa."

Why do public transport drivers like Mayor buy expensive fuel even if it hurts? In economics, it's called demand elasticity. Demand for oil is inelastic, meaning changes in price will have little effect on consumption. 

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The same principle applies to cigarettes. Smokers will buy cigarettes until they quit. Price hikes, such as when sin taxes are imposed, may force them to switch to cheaper brands but they will still find space in their budgets for a pack.

Romeo Mayor, a 68 year old jeepney driver, laments the rising fuel prices which has reduced his income to around P200 a day since he now spends around P2,000 daily on diesel. Arianne Merez
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We live in expensive times

The world thirsts for oil as economies reopen from two years of pandemic lockdowns. This is aggravated by Russia's invasion of Ukraine, which has also affected supplies of commodities such as wheat.

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As early as March, the government floated the possibility of a four-day workweek to help commuters cope with the rising fuel prices.

NEWS YOU CAN USE: GUIDE: 4-Day Workweek, Flexi Time Guidelines for Gov't Workers

The Department of Energy has also warned motorists of more fuel price hikes for the rest of June. Last week, the minimum jeepney fare was raised to P10 to help drivers cope with soaring prices.

Jeepney driver Reynaldo Mariano's pockets are also hurting from the soaring fuel prices, forced to burn P1,700 a day on top of the P500 daily boundary for his jeepney. 

"Wala naman kaming magagawa. Kung ano 'yung karga namin na krudo, ganoon pa din kasi hindi naman kami pwede magbawas eh," he told reportr.

How expensive is too expensive?

Jeepney driver Reynaldo Mariano waits for passengers in San Pedro City, June 21, 2022. Soaring fuel prices have hurt his income since he has to spend more for fuel. Arianne Merez
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Mariano and Mayor both fear that diesel prices could go as high as P100 per liter, admitting that such a scenario might make them rethink their jobs.

"Siguro pag umabot ng P100 na kada litro, baka umuwi na ako ng probinsya. Magsaka na lang ako kasi wala naman akong ibang kabuhayan na pwede na," Mayor said.

For Mariano, he plans to stick it out for as long as he can since he has to feed two children.

"Wala naman kasing choice talaga. Alangan naman tumunganga ka lang? Hangga't kaya, kakayanin," he said.

Demand for fuel is inelastic because it literally powers the economies as we know it, from tricycles, to airplanes and power plants. It's not like a samgyupsal treat, which you can rethink or even put off if your favorite spot raises prices.

For the likes of Mariano and Mayor whose bread and butter rely on fuel, they might reach their limits soon enough.

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In these extraordinary times of pandemic and war, record prices are testing and putting human faces on textbook concepts such as demand elasticity.

"Kapag lugi na, baka tigil na at hanap ng iba kasi nagpapagod ka na lang sa wala," Mayor said.

READ:

Russia Ready to Help Philippines on Energy, Fuel Crisis

GUIDE: Where to Get Fuel Discounts as Oil Prices Soar

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