Diesel-dependent areas face price pressure amid oil spike

The tensions in the Middle East could push up electricity rates in the country’s diesel-dependent off-grid areas, as any sustained spike in global oil prices may force adjustments in missionary electrification zones.

Speaking at a media briefing on Tuesday, Energy Secretary Sharon S. Garin said the Department of Energy (DOE) has begun coordinating with the National Power Corp. (NPC), which operates Small Power Utilities Group (SPUG) plants supplying electricity to areas not connected to the main grid.

“We discussed that with the NPC. We are not dependent on oil for electricity, although there will be an indirect impact. There is a possible impact, not on the supply, but only in case there is a price adjustment,” Garin said. 

Unlike the main grids, which largely run on coal, natural gas, and renewables, off-grid areas rely heavily on diesel-fired generators, leaving them directly exposed to global crude price swings.

While oil accounts for only about 3 percent of fuel used for power generation nationwide — limiting the broader impact on electricity rates — isolated grids that depend primarily on diesel are far more vulnerable to market volatility.

“We are still in discussion with our suppliers on how the prices will adjust. We will update you once we have that cleared,” Garin said.

While the government is preparing for worst-case scenarios, Garin pointed out that any rate impact on off-grid areas will hinge on how long tensions persist and how high global oil prices rise.

Staggered hike implementation likely

Amid concerns over a sharp spike in pump prices, DOE Oil Industry Management Bureau Director Rino Abad said the agency is studying the staggered implementation of any major fuel price increase.

“We have a meeting on the possible staggered payment for the increase but the priority is still to implement the discounts and we have also asked oil companies to look for other resources aside from the Middle East for continuous supply,” Abad said. 

As mandated by the government, Garin assured that local players maintain ample reserves, with a 30-day inventory of crude oil and a 15-day stock of finished petroleum products — while some companies hold up to 60 days of supply.

“I would like to stress that the Philippines has enough supply. We just have to make sure all contingencies are in place because this is an essential commodity,” she said.  

Fuel retailers on Tuesday raised pump prices by P1.90 per liter for gasoline, P1.20 per liter for diesel, and P1.50 per liter for kerosene, following last week’s increases of P0.60 per liter for gasoline and P1.20 per liter for both diesel and kerosene.

The latest adjustments have yet to fully reflect the impact of escalating tensions in the Middle East, raising the likelihood of further increases in the coming weeks if global oil prices continue to climb.