By Chloe Mari A. Hufana and Sheldeen Joy Talavera, Reporters
PRESIDENT Ferdinand R. Marcos, Jr. on Wednesday said that fuel subsidies may be given to stakeholders that are most vulnerable to a spike in oil prices amid an escalating conflict in the Middle East.
“We are starting already with the assumption that oil prices will in fact go up, and I cannot see how [they] will not because the Strait of Hormuz will then be blocked if it escalates,” Mr. Marcos told reporters during an inspection of a burned-down elementary school in Quezon City, according to a transcript from his office. “The prices will certainly be affected.”
He noted that the Philippines had extended fuel subsidies during the coronavirus pandemic and may need to do so again if tensions between Middle Eastern powers trigger a sharp rise in oil prices.
“We will have to do the same for those who are severely affected —stakeholders — by any instability in the price of oil. Yes, it’s a serious problem,” he added.
The Department of Energy (DoE) earlier said the government is ready to roll out fuel subsidies to transport operators and farmers to contain the broader impact of high fuel costs on the prices of basic goods and services.
Oil prices extended their climb on Wednesday, with Brent crude futures up 0.3% to $76.67 per barrel, while US crude rose 0.43% to $75.16 a barrel, Reuters reported. Both had jumped more than 4% in the previous session.
Oil firms in the Philippines are mandated to maintain a minimum 30-day fuel inventory to help stabilize local supply. Should global crude prices breach the $80 per barrel threshold, fuel subsidies for public transport drivers and fisherfolk will be automatically triggered.
Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said a possible spike in oil prices is a concern as it may stoke inflation.
“If oil prices increase significantly, these effects may take some time to be felt, but they will be felt in a few months. Apart from the war causing supply disruptions, speculation on oil can also be a cause of price increases which may worsen oil inflation,” he said in a Viber message.
Mr. Erece said short-term government interventions would temper the impact of high oil prices on consumers as well as control inflation.
Aside from elevated oil prices, the weaker peso may also cause an uptick in inflation.
The peso weakened for a seventh straight session on Wednesday, closing at P56.98 versus the dollar, dropping by 28 centavos from Tuesday’s finish of P56.70. This was the local unit’s weakest finish in over two months or since it closed at P57.08 on April 14.
Year to date, the peso is still up by 1.51% from its end-2024 close of P57.845.
“Both factors would lead to some pickup in inflation and could potentially reduce future Fed and BSP (Bangko Sentral ng Pilipinas) rate cuts. If there is an escalation of the Israel-Iran war, that could further lead to higher global oil prices and inflation,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.
EV ADOPTIONMeanwhile, the government should accelerate the adoption of electric vehicles (EV), fast-track renewable energy development and reduce reliance on imported oil amid the Middle East conflict, analysts said.
“Periodic crises in the Middle East should compel government to expedite the transition to electric or hybrid vehicles in order to protect the public from the acute but severe impact of regional tensions,” Terry L. Ridon, convenor of think tank InfraWatch PH, said in a Viber message.
He added that the crisis should prompt the power sector to build generation facilities that are not dependent on imported fossil fuels sources.
“The RE (renewable energy) sector should be fully supported with more incentives, more investments and more government support,” he said.
Robert Dan J. Roces, an economist at SM Investments Corp., said recent events “highlight the Philippines’ vulnerability to oil price shocks and should serve as a wake-up call to accelerate energy diversification.”
“While fuel subsidies offer short-term relief, we have to strive for long-term resilience, such as investments in renewables, LNG (liquefied natural gas) infrastructure, and energy efficiency, while modernizing transport and power systems to reduce dependence on imported oil,” he said in a Viber message.
Mr. Roces said well-targeted subsidies can help ease the impact of high oil prices.
“This renewed crisis is a reminder: energy security is not just an economic issue — it’s a strategic imperative,” he said.
Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said that the Middle East crisis is a clear reminder that the country must reduce its reliance on imported oil.
“While fuel subsidies help in the short term, we need to fast-track renewable energy, improve public transport, and build energy resilience,” he said in a Viber message.
Based on the two-day trading of the Mean of Platts Singapore, pump prices are expected to rise next week. Diesel is projected to go up by P3.40 to P3.60 per liter; and gasoline by P2.30 to P2.50 per liter, an industry player said.
“Growing uncertainty around the Iran-Israel hostilities and concerns the conflict may intensify and disrupt supply, particularly in the Strait of Hormuz, have further pushed up the prices of crude oil and refined fuel products,” Jetti Petroleum, Inc. President Leo P. Bellas said in a Viber message.
Mr. Bellas said that the company has selected stations that have discount lanes for public utility vehicles and transportation network vehicle service.
“The current price position of most Jetti stations in various trading areas is already substantially discounted. But we will continue to monitor the market situation and the company’s capability if it can still provide further discounts,” he said.
On Tuesday, oil companies implemented a hike of P1.80 per liter for both gasoline and diesel, and P1.50 per liter for kerosene.
The latest price hikes bring the year-to-date adjustments to P6.90 per liter for gasoline and P6.65 per liter for diesel. Kerosene prices, meanwhile, have declined by P0.75 per liter since January.