By Chloe Mari A. Hufana and Sheldeen Joy Talavera, Reporters
PRESIDENT Ferdinand R. Marcos, Jr. on Wednesday stated that fuel subsidies could be allocated to those who are most susceptible to a rise in oil prices due to an intensifying conflict in the Middle East.
“We are beginning with the assumption that oil prices will indeed increase, and I cannot envision a scenario where [they] would not, as the Strait of Hormuz may become blocked if tensions escalate,” Mr. Marcos informed reporters during a visit to a charred elementary school in Quezon City, as per a transcript from his office. “The prices will surely be influenced.”
He mentioned that the Philippines previously provided fuel subsidies during the COVID-19 pandemic and might need to do so again if escalating tensions among Middle Eastern nations result in a sharp increase in oil prices.
“We will have to implement similar measures for those who are greatly impacted — stakeholders — by any fluctuations in oil pricing. Yes, it’s a significant issue,” he remarked.
The Department of Energy (DoE) had previously indicated that the government is prepared to deploy fuel subsidies to transport operators and farmers to mitigate the wider repercussions of high fuel prices on essential goods and services.
Oil prices continued their ascent on Wednesday, with Brent crude futures climbing 0.3% to $76.67 a barrel, while US crude increased 0.43% to $75.16 a barrel, according to Reuters. Both had surged more than 4% in the prior session.
Oil companies in the Philippines are required to maintain a minimum 30-day fuel inventory to help stabilize the local supply. If global crude prices exceed the $80 per barrel mark, fuel subsidies for public transport operators and fishermen will be automatically activated.
Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., expressed that a potential surge in oil prices is worrisome as it could ignite inflation.
“If oil prices rise significantly, these effects may take some time to manifest, but they will become apparent in a few months. Besides the war causing supply disruptions, speculation on oil might also contribute to price hikes that could exacerbate oil-related inflation,” he articulated in a Viber message.
Mr. Erece proposed that short-term government actions would mitigate the effects of high oil prices on consumers and help control inflation.
In addition to soaring oil prices, the weaker peso might lead to an increase in inflation.
The peso depreciated for the seventh consecutive session on Wednesday, closing at P56.98 against the dollar, dropping by 28 centavos from Tuesday’s finish of P56.70. This represented the local unit’s lowest close in over two months since it ended at P57.08 on April 14.
Year to date, the peso is still up by 1.51% compared to its end-2024 close of P57.845.
“Both these factors would result in a rise in inflation and could potentially hinder future rate cuts from the Fed and BSP (Bangko Sentral ng Pilipinas). If the Israel-Iran conflict escalates, it could further drive up global oil prices and inflation,” stated Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.
EV ADOPTION
Conversely, the government ought to hasten the adoption of electric vehicles (EVs), expedite the development of renewable energy, and decrease dependence on imported oil amid the conflict in the Middle East, analysts suggested.
“Regular crises in the Middle East should push the government to accelerate the transition to electric or hybrid vehicles to shield the public from the acute yet severe repercussions of regional tensions,” remarked Terry L. Ridon, convenor of the think tank InfraWatch PH, in a Viber message.
He added that the current crisis should encourage the power sector to construct generation facilities that are not reliant on imported fossil fuel sources.
“The renewable energy (RE) sector should receive robust support through additional incentives, increased investments, and enhanced government backing,” he stated.
Robert Dan J. Roces, an economist at SM Investments Corp., indicated that recent events “underscore the Philippines’ vulnerability to oil price shocks and should act as a wake-up call for energy diversification acceleration.”
“While fuel subsidies provide temporary relief, we must focus on long-term resilience through investments in renewables, LNG (liquefied natural gas) infrastructure, and energy efficiency, while modernizing transportation and power systems to lessen dependence on imported oil,” he expressed in a Viber message.
Mr. Roces noted that well-targeted subsidies could ease the burden of high oil prices.
“This current crisis serves as a reminder: energy security is not merely an economic issue — it’s a strategic necessity,” he emphasized.
Jonathan L. Ravelas, senior adviser at the consulting firm Reyes Tacandong & Co., remarked that the Middle East crisis is a clear indication that the nation must reduce its dependence on imported oil.
“While fuel subsidies provide short-term assistance, we need to expedite renewable energy initiatives, enhance public transport, and develop energy resilience,” he expressed in a Viber message.
Based on the two-day trading of the Mean of Platts Singapore, pump prices are anticipated to rise next week. Diesel is projected to increase by P3.40 to P3.60 per liter; and gasoline by P2.30 to P2.50 per liter, according to an industry player.
“Escalating uncertainty surrounding the Iran-Israel conflicts and worries that the situation may intensify and disrupt supply, particularly in the Strait of Hormuz, have further driven up crude oil and refined fuel product prices,” stated Jetti Petroleum, Inc. President Leo P. Bellas in a Viber message.
Mr. Bellas mentioned that the company has identified stations that offer discount lanes for public utility vehicles and transportation network vehicle services.
“The current pricing situation at most Jetti stations in various trading areas is already significantly discounted. However, we will persist in monitoring the market conditions and the company’s capacity to provide further discounts,” he conveyed.
On Tuesday, oil companies enacted a price increase of P1.80 per liter for both gasoline and diesel, along with P1.50 per liter for kerosene.
The most recent price hikes elevate the year-to-date adjustments to P6.90 per liter for gasoline and P6.65 per liter for diesel. Kerosene prices, in contrast, have fallen by P0.75 per liter since January.
