Millions of Filipinos could be pushed into poverty as rising fuel costs, triggered by the war of the USA-Israel alliance against Iran, strains household incomes, potentially reversing years of progress in poverty reduction, according to the Philippine Institute of Development Studies (PIDS).
In its latest policy note, the PIDS said the poverty rate in 2026 could rise to 14.4 percent under the least severe energy shock scenario, up from the 13.2 percent baseline in 2025. That is equivalent to 1.34 million additional Filipinos falling into poverty.
Under more severe scenarios, poverty could climb further to 15.3 percent and as high as 16.3 percent, putting up to 3.1 million Filipinos at risk of slipping below the poverty line.
“Petroleum products underpin key sectors – such as agriculture, transport, and electricity – so price increases ripple through supply chains, raising food prices, utility costs, and eroding household purchasing power,” the PIDS said.
The impact is expected to be uneven, with rural households likely to experience sharper increases in poverty due to their heavier reliance on fuel-intensive agriculture, limited income diversification, and higher food expenditures.
According to the policy note, poor households already allocate more than 57 percent of their spending on food, making them particularly vulnerable as higher fuel costs feed into food prices.
The PIDS based its analysis on three fuel price shock scenarios developed by the Asian Development Bank, assuming average oil prices at $105, $125, and $145 per barrel.
Prevailing conditions are closest to the first scenario, the state think tank said. Global oil prices remain above $100 per barrel, although domestic pump prices have already seen their first rollback since the war started in late February.
The Marcos administration has recently suspended excise taxes on kerosene and liquefied petroleum gas, but kept the levies on diesel and gasoline. The PIDS said targeted cash transfers would be a more effective response than broad-based tax cuts that would benefit rich households more. It adds that cash transfers are more cost effective and equitable, partly due to their multiplier effect, noting that each peso spent from cash transfers can generate between P1.5 and P1.8 in economic output.
As we hope for the situation in the Middle East to stabilize, and fuel prices to return to some sort of normal, Filipinos also have to brace themselves for the worst case scenarios and come up with the calculations and measures that would help those sectors of society who need it most, just in case we need to act urgently because of irresponsible world leaders who are leading us into all sorts of global crises are unable to undo the damage they have caused, are causing, and could continue to cause.*
