Oil supply shortage looms, supply beyond April not guaranteed: firms

The threat of an oil shortage in the Philippines looms large, as petroleum companies on Thursday admitted that fuel supplies beyond April are not guaranteed amid global oil disruptions stemming from the technical closure of the Strait of Hormuz. 

On day two of the Senate’s Proactive Response and Oversight for Timely and Effective Crisis Strategy hearing, the Independent Philippine Petroleum Company Association (IPPCA) said that although there are still existing fuel importations, there is no assurance that petroleum companies can secure subsequent deliveries after April. 

“Our members have already confirmed with the DOE (Department of Energy) that so far, our incoming importations are still arriving, but we haven’t received any confirmation for future deliveries beyond April,” IPPCA president Tanya Samillano stated, adding that the situation is currently on a “wait-and-see " basis. 

Although there are some offers in the market at present, Samillano lamented that they come at a very high price. 

Raphael Capinpin, executive director of the Philippine Institute of Petroleum (PIP), agreed that there is supply scarcity, which is expected to deplete in May. 

Members of the PIP include major oil firms such as Petron, Shell, Chevron (which owns Caltex), PTT, and Isla LPG Corp.

Many trading oil firms, he said, are deliberately keeping their sources or any information about deliveries for May to gain leverage in securing steady supplies.

“It is not a secret that it's very hard to secure supplies now. So many of the traders are keeping quiet, especially for deliveries in May. There have been no responses to tenders for May,” Capinpin told senators.

He also echoed Samillano’s concerns that securing supplies poses a big challenge to petroleum firms because it's “very expensive.”

Petron Corporation general manager Lubin Nepomuceno shared the same frustration, stressing that sourcing crude and finished products continues to become “very challenging” amid the ongoing United States-Israel conflict with Iran.

Petron—the largest oil refining firm in the country—primarily sources its crude oil from the conflict-stricken Middle East, whose energy infrastructures continue to be a core target of Iranian strikes. 

Nepomuceno said Petron cannot secure supplies from exporting countries neighboring the Philippines, such as China, Thailand, and Singapore, because they have imposed temporary bans on selling fuel products to other nations amid the oil crisis.

“To this end, the government may need to intervene through facilitation of supply arrangements with other countries,” he averred. 

The administration, he suggested, should mimic India’s strategy in keeping a petroleum reserve in the months ahead by buying Russian crude oil. Recall that the US temporarily lifted sanctions on Russian oil to compensate for the global oil supply disruptions caused by the war it waged against Iran.

India has reportedly secured approximately 60 million barrels of Russian crude oil for April delivery in view of worsening supply disruptions due to the prolonged closure of the Strait of Hormuz, where a significant portion of the world’s seaborne oil passes. 

“Our government may consider securing [a] waiver from the United States to allow importation of crude from Russia. Currently, with the embargo on Russia, we are constrained to procure crude, which is a viable feed for our refinery in Bataan,” Nepomuceno lamented. 

President Marcos Jr. said the country is considering securing fuel supplies from Russia, despite Russia not being a traditional trading partner of the Philippines.

Nepomuceno proposed that the Philippines, which is heavily dependent on oil imports from the Middle East, should also establish a strategic petroleum reserve or stockpile—similar to those of other countries—to build a buffer stock and stabilize prices during oil crises. 

The government would need to shell out around $108 billion for a six-month oil reserve at $60 per barrel, according to Nepomuceno. 

“Supply disruption is more expensive and will be a catastrophic consequence for the economy…Investment for the strategic crude facility is estimated to be $50 billion, for which the government could provide a soft loan for the interested investor,” he pointed out.

Marcos, on Wednesday, assured that the country’s current oil buffer could last at least 45 days and expressed confidence that shipments will continue to arrive afterward.

The Department of Budget and Management said it activated a P20-billion emergency fund for the Department of Energy to boost its efforts to stabilize oil prices and ensure uninterrupted essential services.

Data from the DOE showed that the total available supply of gasoline and diesel can last up to 53.14 days and 45.82 days, respectively, as of 20 March.

Meanwhile, kerosene supplies could last approximately 97.93 days, while jet fuel supplies could last 38.62 days. Fuel oil and LPG stocks are also projected to last about 61.49 days and 23.51 days, respectively.

Meanwhile, the Department of Foreign Affairs on Thursday vowed that the Philippine government will continue to cooperate with “all possible partners to contribute to regional and global stability,” while securing the country’s national interests.