Here are my forecasts for the next half of 2008, and I feel gloomy just thinking about most of them.

1. More Oil Price Increases – a worldwide trend with no let-up in sight. I get a fever every time I go to the gas station. Unleaded is now P60.00 plus per liter at the pump and rising weekly. Crude hit a new record high of U.S.$ 143/barrel and keeps climbing. It will get worse in the last quarter as winter approaches. I fear we will hit the nightmare scenario of U.S. $ 200.00/barrel sooner than predicted.

2. Food prices and other basic commodities will increase - a no- brainer. The effect of rising energy costs, combined with other factors like increased demand and diminished production, will drive up the inflation rate, which in Metro Manila has reached double digits. Expectedly, food will exhibit the steepest price increase. The negative impact on overall income due to inflation will naturally lead to a drop in personal consumption. Which will in turn slow down the economy etc., etc. ad nauseum. Read the rest of this entry »

Jared Diamond, professor at U.C.L.A., asks: What’s your consumption factor ?

His question is relevant as the world reels from the oil and food crises, which will get worse before it gets better. The Philippines will surely be one of the hardest hit, as crushing poverty combined with the continually rising prices of basic commodities will result in a potentially explosive social cocktail. President Arroyo, an economist herself, understands this all too well. This must keep her up nights, as it does many of us.

Diamond tells us to consider the number “32”. Read the rest of this entry »