THE IMPACT OF OIL PRICE HIKE TO THE INCOME OF TRICYCLE DRIVERS IN

ORMOC, CITY

A Research Study

Presented To

The Faculty of Senior High School Department of

.Saint Aloysius Institute Technology, Inc

In Partial Fulfillment of the Requirements in

Inquiries, Investigation, and Immersion: Quantitative Research

:Submitted by

MICAH PIASTRO

ELLA JEAN K.C AWING POTOY

GENEVIVE ALVARADO ARBILON

JONALYN ANDRIN MOLERO

ANGELINE MALINAO

IAN CODOG CAPUYAN

:Submitted to

MS. RONALYN O. ABRANTES

Subject Teacher

March, 2023

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 CHAPTER I

Introduction

Changes in crude oil price are the global phenomena that felt by each

country in the world. The oil price impact is in particular influential in determining

the economies of emerging countries as these economies are not financially

stable and are weak to the influences of external shocks. One of the main

impacts from oil price changes is on inflation rate/ changes on prices. Fluctuation

in inflation or price levels may further lead to economic changes which will affect

the economic performance in overall.

The oil price increase recorded between 2003 and July 2008 has reflected

the boosting of demand from fast-growing economies like China and India, as

well as supply shortages originating from geopolitical tensions and short-term

market speculative movements. Besides this, the reduction of oil production from

Organization for Economic Co-operation Development countries, associated with

political instability in the Gulf Region, Nigeria, and Venezuela have contributed to

higher oil prices too. Furthermore, major oil exporting countries have experienced

strong economic growth, and at the same time they have subsidize their local oil

demand to such an extent that the available oil exported to the world market has

been reduced by the growth of domestic demand.

Due to the increasing of oil price hike in Ormoc, City this study aims to

investigate if oil price hike has an impact to the income of tricycle drivers and this

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study is important due to the fact that it will provide some insight about the ability

of tricycle drivers to survive under rising fuel costs.

Statement of the Problem

Transportation is an important sector of the economy. Gasoline is getting

more expensive and will affect to the drivers. This study was conducted to

determine the impact of oil price hike to the income of tricycle drivers in Ormoc,

City.

Specifically, it is intended to answer the following questions;

1. What are the effects to the daily income of tricycle drivers?

2. How do they divide their needs between filling up on gas and other

needs?

3. Is their income enough to sustain their daily needs?

Hypothesis of the Study

Based on the research problem stated above, the research hypothesis

was tested. There is a significant impact of oil price hike to the income of tricycle

drivers in Ormoc City.

Importance of the Study

The findings and results of this research about the impact of oil price

hike to the income of tricycle drivers in Ormoc, City will be beneficial to the

following:

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 Gasoline Stations. They will have information about how the price at the

pump also reflects local market conditions and factors, such as the fueling

location and the marketing strategy of the owner. The cost of doing business by

individual gasoline retailers can vary greatly depending on where a gasoline

fueling station is located. These costs include wages and salaries, benefits,

equipment, lease or rent payments, insurance, overhead, and state and local

fees.

Community. The benefit of performing this research will help people in

the community to have the ability to appraise on how does oil price hike affect the

income of tricycle drivers, not just for the tricycle drivers but for each and

everyone that uses gas everyday. It is also important for every family in the

community to be aware if oil price hike gives an impact to the income of tricycle

drivers, for them to have an idea on what will they do or not to do.

Drivers. This study aims to help the drivers what is the impact of oil price

hike to their daily income and how to balance their daily needs.

Future Researchers. This study will serve as their insight reference and

will give them ideas as insights if they will having research with same topic.

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Scope and Limitation of the Study

This study was conducted in Ormoc City, Leyte. The respondents of this

study were the selected tricycle drivers. This study started during the year 2022-

2023.

Definition of Terms

Oil Price Hike. Refers to the rising price of oil.

Phenomena. Refers to a fact or situation that is observed to exist or

happen, especially one whose cause or is in question.

Economy. Refers to a system of organizations and institutions that either

facilitate or play a role in the production and distribution of goods and services in

a society.

External Shock. Refers to an unexpected event that dramatically changes

an entire economy's direction, either upward (value gains and job creation) or

downward (value lost and job destruction).

Inflation. Refers to the rate of increase in prices over a given period of

time.

Fluctuation. Refers to an irregular rising and falling in number or amount;

a variation.

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Conceptual Framework

The conceptual framework of this study aims to explore the relationship

between the independent variable, oil price hike, and the dependent variable, the

income of tricycle drivers. Additionally, the framework considers the potential

moderating effect of commuters and the mediating role of driving hours.The

independent variable, oil price hike, represents the fluctuations in oil prices over

time. As oil prices increase, tricycle drivers face rising operating costs,

particularly in relation to fuel expenses. These increased costs can directly

impact their income, potentially leading to financial challenges and reduced

earnings.The dependent variable, the income of tricycle drivers, serves as the

indicator of their financial stability and well-being. This variable encompasses the

total earnings derived from tricycle services, including fares and other income

sources.The framework incorporates the moderating effect of commuters, who

represent the passengers utilizing tricycle services. Commuters may play a role

in influencing the income of tricycle drivers. Factors such as changes in demand,

passenger preferences, and willingness to pay higher fares during oil price hikes

can influence the earnings potential of tricycle drivers.Furthermore, the

framework considers driving hours as the mediating variable. Driving hours reflect

the amount of time tricycle drivers spend operating their vehicles. Longer driving

hours may be a result of various factors, including increased demand during oil

price hikes, the need to compensate for higher operating costs, and efforts to

maximize income. The mediation of driving hours suggests that the relationship

between oil price hike and income may be influenced by the amount of time

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tricycle drivers spend on the road.By examining the interplay between the

independent variable (oil price hike), the dependent variable (income of tricycle

drivers), the moderator (commuters), and the mediator (driving hours), this

conceptual framework provides a comprehensive understanding of the complex

dynamics at play in the context of tricycle transportation. It serves as a guide for

the subsequent data collection, analysis, and interpretation, enabling a deeper

exploration of the relationships between these variables and their implications for

the income of tricycle drivers.

Oil Price Hike

(Independent Variable )

Commuters Driving Hours

(Moderator ) ( Mediator )

Income of Tricycle Drivers

(Dependent Variable )

Figure 1.

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 CHAPTER II

REVIEW OF RELATED LITERATURE

This chapter shows the review of related literature that is essential for the

study. The study focused about the oil price hike that affects to the income of

tricycle drivers.

Over the past two years, oil prices have increased very sharply, with the

Fund's reference price rising from a 25 year low of $11 per barrel in February

1999 to a peak of close to $35 per barrel in the first week of September 2000.

After easing somewhat in early October, oil prices increased again in late

October and November to an average of about $32 per barrel. At the same time,

futures markets indicated that average oil prices in 2001 would be about $5 per

barrel higher than projected in the most recent World Economic Outlook (WEO)

published in late September. The recent World Economic Outlook contained an

extensive discussion of the potential impact of higher prices. The pose of this

paper is to expand on that discussion in the light of developments since then.

The paper reviews the causes underlying the recent oil price increase and the

outlook for 200, discusses the potential impact of a sustained $5 per barrel

increase in the price of oil on the global economy, focusing on the key channels

through which it operates, and the effects of differing policy responses.Provides a

summary and includes a discussion of main policy implications for developed and

developing countries. An reviews lessons from earlier oil price increases. Since

late November, oil prices have fallen back significantly, reflecting both the

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slowing of global economic activity-which to some degree, of course, itself

reflects higher oil prices-and the impact of recent OPEC production increases,

resulting in a rising level of stocks. As of December 20th, the Fund's reference

price had fallen back to just over $22 per barrel, while futures markets suggest

that the average price of oil in 2001 will be just under $24, only $1 higher than in

the original WEO baseline. While oil prices remain highly volatile, if this decline is

sustained the recent spike in oil prices would be shorter lived than assumed in

the discussion below, and the resulting impact on growth and inflation would be

correspondingly less severe.

In October and November, 2000 the world oil price averaged over three

times higher than its February 1999 low, and, excluding the Gulf war period,

reached a 15 year high in both real and nominal terms. In the mid-1990s, as the

pace of economic expansion picked up so did world demand in general for

energy and for oil in particular. The effect on oil prices was muted as oil

production largely kept pace with the increase in oil consumption. With the onset

of the Asian crisis in 1997, as well as subdued activity in Japan and Europe,

global consumption of oil fell significantly short of production and the Fund's

indicator price for oil fell progressively from about $20 a barrel in early 1997 to

below $11 in February 1999.

In an effort to arrest the decline in the price of oil, the Organization of

Petroleum Exporting Countries (OPEC) met on several occasions in 1998 and

concluded agreements to restrain production. The upward trend in production

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was reversed, but compliance with the agreements was not sufficient to prevent

price declines. In early 1999, however, OPEC's production restraints were

reinforced by parallel agreements with some other oil exporting countries (most

notably Mexico and Norway) which enabled oil production to be reduced more

effectively from the second quarter of 1999 onwards. Prices progressively

increased, more than doubling by the end of the year and oil production fell below

oil consumption even in the summer period when stocks usually accumulate.

Early this year, in an effort to moderate the price increase, OPEC policy reverted

to one of periodic increases in production targets. In March, OPEC increased

targeted production by 1.7 million barrels per day-equivalent to about 2 percent of

world production. Following this increase, and partly in response to concerns by

some OPEC members on the long term effect of high prices, including loss of

market share to non-OPEC producers, OPEC informally defined a target price

band of $22 to $28 a barrel and prescribed increases or decreases of one half

million barrels per day, should the OPEC reference price remain outside this

range for more than 20 consecutive market days. Subsequently, OPEC

increased its production targets by amounts in excess of one half million barrels

on June 21 and September 10, and by one half million barrels on October 30.

In terms of the magnitude of the price change, the first and second oil

price shocks, in the mid and late-1970s, respectively, each entailed a more than

tripling of the price of oil; and both lasted for about 5 years. By contrast, the price

spike in 1990-91 lasted only about six months and even at its highest point was

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less than double the price in the preceding period. latest World Economic

Outlook projections were based on an assumed path of oil prices that is about

$5/barrel lower in 2001 and 2002 than suggested by futures markets during

October and November 2000. Higher oil prices affect the global economy through

a variety of channels:

There will be a transfer of income from oil consumers to oil producers. As

the propensity to spend of those who lose income (energy consumers) is

generally larger than the propensity to spend of those who gain income (energy

producers), there will be some fall in demand. On an international level, the

transfer is from oil importing countries to oil exporters, and oil exporters tend to

expand demand only gradually (in the past, they have spent about 1/3 of their

additional revenues after one year, rising to 75 percent after 3 years).In addition,

a reduction in demand can also occur within producing countries that allow higher

oil prices to feed through to consumers, as energy producers tend to have a

lower propensity to consume than energy consumers. There will be a rise in the

cost of production of goods and services in the economy, given the increase in

the relative price of energy inputs, putting pressure on profit margins. As the oil

intensity of production in advanced countries has fallen over the past three

decades, the supply side impact for a given increase in oil prices can be

expected to be less than in past episodes. In developing countries, however,

where the oil intensity of production has declined less, the impact may be closer

to that in the earlier period. There will be an impact on the price level and on

inflation. Its magnitude will depend on the degree of monetary tightening and the

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extent to which consumers seek to offset the decline in their real incomes

through higher wage increases, and producers seek to restore profit margins.

These responses can create a wage/price spiral, as was the case, for example,

during the oil shocks in the 1970'sThere will be both direct and indirect impact on

financial markets. Actual as well as anticipated changes in economic activity,

corporate earnings, inflation, and monetary policy following the oil price increases

will affect equity and bond valuations, and currency exchange. Finally, depending

on expected duration of price increases, the change in relative prices creates

incentives for suppliers of energy to increase production (to the extent that there

is scope for doing so) and investment, and for oil consumers to economize. To

undertake an analysis of these five channels, several simulations of a sustained

$5 per barrel (20 percent) increase in the price of oil were run using MULTIMOD,

focusing on the implications for real GDP, inflation, and monetary policy. In these

simulations, it is assumed that the monetary authorities in advanced countries

target expected core inflation, while fiscal policy is passive, allowing automatic

stabilizers to operate. The results, reported indicate that a $5 per barrel increase

in the price of oil would reduce the level of global output by around ¼ percentage

point over the first 4 years, after which the output losses slowly fade away. The

impact is somewhat larger for industrial countries than for developing countries

as a group, particularly as regards domestic demand, largely due to terms-of-

trade effects (as many developing countries are net oil exporters). However, as

discussed below, the significant diversity across developing countries, in

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particular the mixture of oil exporters and importers, means that the impact on

individual developing countries is often large.

This study the affected variables income of tricycle drivers,the income of

tricycle drivers is directly affected by oil price hikes as increased fuel expenses

can reduce their earnings and financial stability.Operating costs, the operating

costs of tricycle drivers, including fuel expenses, maintenance, and other related

expenses, are influenced by oil price hikes. Financial stability,oil price hikes can

impact the overall financial stability of tricycle drivers, affecting their ability to

cover daily expenses, save, and support their families. The effected variables are

fare adjustment, tricycle drivers may adjust their fares in response to oil price

hikes to mitigate the impact of increased operating costs on their

income.Passenger demand, changes in oil prices can potentially influence the

demand for tricycle services. Higher fares during oil price hikes may affect the

willingness of passengers to utilize tricycles, leading to fluctuations in passenger

demand.Driving hours, tricycle drivers may increase their driving hours during

periods of oil price hikes in an effort to maximize their income and compensate

for the increased fuel expenses.Coping mechanisms, tricycle drivers may employ

various coping mechanisms, such as seeking additional sources of income,

reducing personal expenses, or collaborating with other drivers, in response to

the financial challenges posed by oil price hikes

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 On January 3, 2023 the Philippine Department of Energy (DOE) recorded

double-digit increases for domestic oil prices compared to their values a year

ago, with the department’s Oil Monitor recording year-to-date per liter increases

of 17.80 PHP for gasoline, 29.40 PHP for diesel, and 24.35 PHP for kerosene.

These increases compound upon similar jumps in prices during 2022, with the

DOE recording year-to-date increases per liter of 17.65 for gasoline, 14.30 PHP

for diesel, and 11.54 for kerosene on January 4, 2022. Combined, these equal

increases of 35.45 PHP for gasoline, 47.05 PHP for diesel, and 35.89 PHP for

kerosene in just two years. These price hikes are far cries from the significantly

smaller increases recorded by the DOE for 2020 and 2021, with the department

even having recorded a decrease in average fuel prices in 2019. As a result, the

Filipino people have had to pay more and more pesos to fill up their gas tanks,

with this also having knock-on effects on other sectors as a result of, for instance,

the fuel necessities of transportation and logistics. One cause of this rise in prices

is the Russia-Ukraine War (Basdekis et al., 2022; Appiah-Otoo, 2022; Orhan,

2022; J.P. Morgan Research, 2022; Kuhdaykulova et al., 2022), with both

countries being “major commodity producers” (Orhan, 2022). Russia itself is the

world’s third largest oil producer (International Energy Agency, n.d.) with a

significant 12% market share (J.P. Morgan Research, 2022), and Ukraine

similarly has oil reserves of its own, with the Dnipro-Donetsk basin being a “major

oil and gas producing region accounting for 90 percent of all current Ukrainian

production” (United States International Trade Administration, n.d.). The

sanctions and price caps levied upon Russian oil have also impacted global oil

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supply, further exacerbating the rise in prices – something the DOE itself notes in

its January 10, 2023 Oil Monitor and in its “Oil Supply/Demand Report YTD June

2021 vs YTD June 2022”. To add to this, the “bulk of [the Philippines’] direct

petroleum products imports come from countries that use Russian crude in [their]

refineries” (Philippine DOE, 2022). The DOE’s Oil Monitor reports reflect the

War’s effects on oil prices, recording per liter fuel price hikes of 3.60 PHP for

gasoline, 5.85 PHP for diesel, and 4.10 PHP for kerosene on March 8, 2022 as

the War and its repercussions started to set in globally. In addition, the

weakening of the Philippine Peso compared to the United States Dollar, a topic

whose own causes and effects would merit a fuller discussion that would make

this paper far too long, may also be touted as a reason for these increases.

Statistics from the Bangko Sentral ng Pilipinas (2023) record a trend of the peso

weakening compared to the dollar, steadily moving from roughly 48 pesos to a

dollar in January 2021 to about 56 pesos to a dollar by December 2022. This

matters because oil exporters and importers transact in USD as a result of the

prevailing petrodollar system (Farley, 2022). As a result, more pesos have to be

paid in order for domestic companies to procure oil and petroleum products, and

this increased cost is then passed onto consumers trade deficit for years,

importing more than it has exported in general (Philippine Statistics Authority,

2022), and this is also true for its fuel needs. Crude oil imports in 2022 increased

by 105.5% compared to the previous year and the import of refined petroleum

products increased by 1.01% (Philippine DOE, 2022). The Philippines has been,

for years, a net oil importer (Cigaral, 2021), which makes it even more vulnerable

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to the global oil shocks caused by the Russia-Ukraine War and the weakening of

its currency. Of course, more factors exist such as the overall rise in inflation

worldwide as a result of various causes like the COVID-19 pandemic, the sudden

increase in demand for fuel as a result of a return to normalcy after a year of

lockdown (Herron et al., 2022), and others, but the reasons discussed in this

paper are some of the major reasons for the increase. Further discussion of other

causes would simply make this paper too long. Solutions – or at the very least

band-aids to alleviate the price increase’s effects – become even more urgent as

a result of the high prices’ knock-on effects like the rise in the prices of goods

(Lioudis, 2022; Kun Sek et al., 2015; Sarmah, 2021) as reflected in reality by

inflation and consumer price index statistics reported by the Philippine Statistics

Authority, the social, economic, and other such effects of Filipino consumers

being limited in their ability to drive their own automobiles, and so on. Several

suggestions have floated about, such as the temporary suspension of the Tax

Reform for Acceleration and Inclusion (TRAIN) law’s excise tax on fuels (Senate

of the Philippines, 2022), fuel subsidies which the government had previously

allocated 3 billion PHP for in 2022 (Philippine Department of Budget and

Management, 2022), and others. Still, prices remain high; and action –concrete

action now, not later – is necessary to prevent even more damage to consumers’

pockets.

The review of related literature on the impact of oil price hikes on the

income of tricycle drivers reveals a range of factors and dynamics that influence

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the financial well-being of this vulnerable workforce. Several studies have

examined the relationship between oil price fluctuations and the income of

transportation service providers, including tricycle drivers, in both urban and rural

settings.The literature consistently highlights that oil price hikes have a significant

impact on the income of tricycle drivers. As oil prices increase, tricycle drivers

face higher operating costs, particularly in terms of fuel expenses, which directly

affect their earnings. This often leads to a decrease in their income, making it

challenging for them to sustain their daily needs and achieve financial

stability.Fare adjustments emerge as a common coping mechanism employed by

tricycle drivers during periods of oil price hikes. Studies indicate that many tricycle

drivers increase their fares to compensate for the increased fuel costs, aiming to

maintain their income levels. However, the frequency and magnitude of fare

adjustments can vary based on factors such as local regulations, competition,

and passenger demand.Passenger demand is a critical factor in understanding

the income of tricycle drivers during oil price hikes. Fluctuations in oil prices can

influence the willingness of passengers to utilize tricycle services, as higher fares

may impact their affordability. Some studies suggest that during periods of oil

price hikes, tricycle drivers experience changes in passenger demand, with some

drivers reporting a decrease in the number of passengers.Driving hours also play

a role in the income of tricycle drivers during oil price hikes. Many drivers opt to

increase their driving hours to compensate for the higher operating costs and

maintain their income levels. However, longer driving hours can lead to increased

fatigue, safety concerns, and potential negative effects on overall well-being.The

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literature emphasizes the importance of exploring supportive measures to

address the challenges faced by tricycle drivers during oil price hikes. These

measures include implementing fare regulations, providing financial literacy

programs, exploring collaborative initiatives among drivers, and considering long-

term solutions such as alternative fuel options or government subsidies.Overall,

the review of related literature underscores the significant impact of oil price hikes

on the income of tricycle drivers. The findings highlight the need for

comprehensive policies, supportive mechanisms, and interventions to ensure the

financial stability and well-being of tricycle drivers, who play a crucial role in

providing affordable transportation services in many urban and rural areas.

Further research is needed to delve deeper into specific regional contexts and

explore additional factors that may influence the income of tricycle drivers during

oil price hikes.

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 CHAPTER III

METHODOLOGY

This chapter describes the design, methods, instrumentation, and

procedures used in the conduct of this study. It includes the research design,

research environment, research respondents, data gathering procedures and the

statistical treatment of data used for this study.

Research Design

This study adhere the quantitative approach, using the descriptive survey

design to associate the impact of oil price hike to the income of tricycle drivers in

Ormoc, City. Since it was quantitative approach, the subject matter itself

determines the variables and not the researchers. This research design generally

uses survey questionnaires to collect data for the objective of determining the

impact of oil price hike to the income of tricycle drivers in Ormoc, City.

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 Figure 2. Research Environment

Research Environment

This research study was conducted in terminal of Ormoc City, province

of Leyte. The figure 2 shows the location of terminal.

Research Subjects/Respondents

The respondents of this research study were the tricycle drivers in

Ormoc City. The researchers used voluntary sampling design to be used.

In this sampling design, the respondents were willing to answer the

questionnaire given by the researchers.

Research Instruments and Data Gathering Procedure

The researchers utilized a survey questionnaire as their primary data

gathering instrument. This research instrument was designed to collect

information regarding the demographic profile of the respondents.Prior to

conducting the survey, the researchers sought permission to approach the

tricycle drivers as participants. Once permission was granted, the

questionnaires were distributed to the drivers. After completion of the

questionnaires, the researchers collected and retrieved them. The

gathered data was then compiled, tabulated, and subjected to statistical

analysis.

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Statistical Treatment of Data

The researchers collected data and organized it through

tallying,tabulating, and applying statistical methods to facilitate its

management and interpretation for hypothesis testing. In this study the

following statistical measures were employed.

Frequency and Percentages. This was used to measure the

distribution of the demographic profile of the tricycle drivers and the impact

of their income when the oil price increases.

P= F/N(100)

Where:

P = percentage

F = frequency of each category

N = total number of respondents

100 = constant multiplier

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