Oil price pass-through in the Philippines: decomposing fuel and non-fuel inflation

Jan Carlo Punongbayan
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Jan Carlo Punongbayan: School of Economics, University of the Philippines Diliman

No 202603, UP School of Economics Discussion Papers from University of the Philippines School of Economics

Abstract: This paper estimates the pass-through of world oil price innovations to Philippine fuel prices and headline CPI, and decomposes total CPI pass-through into a fuel-basket component and a residual non-fuel component. Using a structural VAR and 25 years of monthly pump price data, I find that a 10 percentage point increase in year-on-year oil price growth is associated with about a 4.9 percentage point increase in gasoline price growth and a 6.6 percentage point increase in diesel price growth at 12 months, while the corresponding effect on headline CPI inflation is about 0.65 percentage points. The residual non-fuel component accounts for the larger share of the CPI response, though its estimated magnitude is somewhat sensitive to the estimation method. Results are robust to extensions with the exchange rate and rice prices, local projections with HAC inference, alternative data transformations, sub-period splits around the TRAIN Law, and an alternative pump price series.

Keywords: oil price pass-through; consumer prices; structural VAR; Philippines (search for similar items in EconPapers)
JEL-codes: C32 E31 F31 Q43 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2026-03
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Published as UPSE Discussion Paper No. 2026-03, March 2026

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Persistent link: https://EconPapers.repec.org/RePEc:phs:dpaper:202603

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