Pinoys exposed, vulnerable
The Iranian blockade of the Strait would penalize the country, which has only a short 30-day petroleum reserve.
Text size
The Iranian blockade of the Strait would penalize the country, which has only a short 30-day petroleum reserve.
Misguided policies and the absence of forward-looking programs could leave the country among the hardest hit if the Middle East conflict drags on.
Iran does not appear to be running out of resolve, as the decimation of its senior leadership has given rise to a more determined young generation of extremists. The situation is different from what the Americans expected, which is that the offensive will not be very different from the Venezuela blitz that ended the regime of Nicolas Maduro.
More than 90 percent of our petroleum passes through the Strait of Hormuz, which Iran has closed.
An economist said that the Iranian blockade of the Strait would penalize the country, which has only a short 30-day petroleum reserve. Japan has about 250 days of reserves; the country lacks flexibility in supply.
When the supply runs short, the nation will agonize, particularly because the Marcos administration relied on the United States-led alliance while neglecting ties previously built with Russia and China.
Right now, most fuel purchases come from the Organization of the Petroleum Exporting Countries (OPEC), whose members are mostly affected by the ongoing war.
Canada produces petroleum products, but it mainly supplies the United States, so its available supply may be limited. Russia, meanwhile, is selling oil at a discount to China amid the war in Ukraine.
Given geography and proximity, Russia seems to be a good option, or the country can source refined petroleum products from China, since China imports oil from Russia and Central Asia and refines it.
The administration will have a hard time negotiating with Beijing over oil supplies due to heightened maritime friction and the perception that the Philippines is a loyal pawn of the United States.
The actions currently being taken, such as staggering price increases and implementing a four-day workweek, would have little impact on the widespread effects of high prices.
According to an economist, a four-day workweek could reduce productivity by 20 percent, further hurting the economy.
The plan not to implement the full extent of the price increases will backfire since, with the fluid market situation, the increase in the cost of crude oil is expected to pile up.
“Stockpiling should have happened before the war with Iran. We already knew that more than 90 percent of our oil passes through the Strait of Hormuz,” according to the economic expert.
Electricity prices will jump almost simultaneously. Oil is used daily in retail consumption, but electricity generation also relies heavily on petroleum.
The government clearly lacks an active mechanism to control the situation. Leadership by example would be the most effective measure to manage the looming crisis. Government officials should try to use public transportation like ordinary citizens do to persuade car owners to use mass transit.
Another inevitable impact would be on remittances, which recently topped $3 billion in one month. If overseas Filipino workers in the Middle East lose their jobs, remittances could decline by around 20 percent, weakening the consumption-driven economy.
Last year, household spending slowed in the fourth quarter, along with public spending, bringing growth down to about 4.4 percent, mainly due to uncertainties as the corruption turmoil heated up.
If the war extends beyond the two months projected by US President Donald Trump, this year’s economic growth could slip below 4 percent. All told, the Marcos administration, already grappling with a corruption crisis, has left the country exposed amid a worsening global environment.
