Why Are Fuel Costs High And How It Affects The Shipping Industry?

The Philippines is currently experiencing price increases for almost every product in the market, including fuel costs. This price hike has specifically affected the transportation industry. While there had been several rollbacks, those were still insufficient to cover up the inflation happening, especially since this is the same situation other countries are currently facing. 

These price increases occurred due to various factors. One of which is the war between Russia and Ukraine. Since the invasion of Russia to Ukraine started, the world, specifically the European Union and the US, have imposed multiple sanctions on Russia for penalization. These sanctions, though, led to Russia selling less oil in the market. And because Russia is among the biggest oil exporter in the world, the low supply and high demands for oil resulted in higher prices. 

Many countries tried to shop for alternative sources, but oil production in the market has winded down, making it more challenging to find different sources. Because of this, the oil prices are expected to remain high until Russian oil returns to the market. But since the war sees no sign of ending anytime soon, it is unlikely that the global oil supply and prices will return to normal.

And while the Philippines has no direct involvement with the war that is going on or any trade with the two conflicting countries, the country will still feel the ripple effects of the situation. This results in higher prices of air and ocean freight rates because of longer container routes, high fuel prices, and possible high surcharges.

But it must also be worth noting that international shipments to the Philippines have always been costly due to various reasons, such as tax. The government imposes a 12% VAT on goods above the Php 10,000 threshold. This is something that customs brokerage firms in the country must carry out.

For a more detailed discussion about this topic and customs brokerage services, you may check this infographic by Excelsior.