Analysis of the Impact of Changes in the Prices of Rice and Fuel on Poverty in the Philippines Celia M. Reyes, Alellie B. Sobrevinas, Joel Bancolita, and Jeremy de Jesus De La Salle University, Angelo King Institute cbms@dls-csb.edu.ph DLSU Business & Economics Review 20.1 (2010), pp. 65-98 Copyright © 2010 De La Salle University, Manila, Philippines This study aims to assess the impact of rising prices of rice and fuel on poverty in the Philippines. In particular, the variations in the potential effects among different group of households were analyzed using household level data. Results of the study confirm that the impact of increasing prices of rice and fuel vary across different groups of households depending on the sector of employment, level of urbanity, income group and geographical location. In fact, there are losers and gainers from the recent increases in the prices of rice and fuel. In response to higher prices, households adopted different coping mechanisms, some of which are damaging and counter-productive in the medium- and long-run. Keywords: Poverty, community-based monitoring system, impact analysis, prices, rice, fuel, coping mechanisms, pass-through rates, net benefit ratio The world experienced a dramatic increase in food and fuel prices during the first half of 2008. According to the Food and Agriculture Organization (FAO, 2008), international nominal prices of all major food commodities reached their highest levels in nearly 50 years while prices in real terms were highest in nearly 30 years. The FAO food price index (a trade-weighted Laspeyre’s index of international quotations expressed in US dollar prices for 55 food commodities) increased by 53.0% for the first three months of 2008 compared to the same three months in the previous year. The rising prices of food is led by vegetable oils, which increased by more than 97.0%, followed by grains, which increased by about 87.0%. The current agricultural market is characterized by the increase in international prices of not just a few but of nearly all major food and feed commodities. The increase in prices is expected to have adverse effects on poverty and is worrisome precisely because it is expected to hurt the poor the most. Meanwhile, fuel prices have also been increasing for seven consecutive years according to the U.S. Energy Information Administration (2008). During the first quarter of 2008, the oil price index increased by 66.5%. The impact of higher fuel prices depends on two components, namely: (1) direct effect of higher prices of petroleum products consumed by the household; and (2) indirect effect on the prices of other goods and services consumed by the households that use fuel as an intermediate input. These changes in the global food and fuel prices are also affecting developing countries, including the Philippines. As such, it is very important to determine the effects