Oil deal hopes ease pressure, but Hormuz risk lingers

The Philippines could see fuel prices continue to ease if a reported United States-Iran agreement materializes this week, but the recent oil shock has already exposed a deeper problem: the country’s heavy dependence on Middle East oil.

Energy Secretary Sharon Garin said any relief from lower prices would be welcome, but the crisis underscored long-standing vulnerabilities in the country’s energy security, with more than 90 percent of the local oil supply ultimately tied to the Middle East and the Strait of Hormuz.

“It’s good news not just for the Philippines but for the whole world,” Garin told reporters during a media briefing on Monday.

“The conflict has caused so many problems in countries that were not even involved. Hopefully, this positive development becomes a signed agreement,” she said.

The disruption has prompted the government to fast-track measures aimed at strengthening the country’s defenses against future oil shocks, including a formal oil crisis response framework, reduced dependence on imported diesel and plans for a national strategic petroleum reserve.

“As we are fast in responding to disasters like typhoons and earthquakes, we need to have an oil crisis response also in place,” Garin said. “Actions should be automatic. Agencies should already know what to do.”

Department of Energy Undersecretary Alessandro Sales said expectations surrounding a possible US-Iran deal have already weighed on global crude prices.

“This has sort of been priced in already, but we do expect an immediate reaction if the agreement is signed,” Sales said. “The adjustment next week would continue the downward trend.”

Crude prices have retreated to the $80-per-barrel range as traders bet on easing geopolitical tensions, according to Sales.

Still, motorists should not expect fuel prices to snap back to pre-conflict levels anytime soon.

“There is space for pump prices to come down as well, but does it go down to pre-war levels? Not immediately — probably another six to 12 months,” Sales said. “It’s really an issue of restarting supply that was disrupted by the war.”

Meanwhile, the DOE has shifted to a new system for announcing fuel price adjustments, releasing a range of possible movements instead of a single estimate.

Garin said gasoline prices could either fall by P0.32 per liter or rise by as much as P1.68 per liter starting tomorrow.

Diesel prices are expected to decline by P3.71 to P5.71 per liter, while kerosene prices may drop by P0.50 to P2.50 per liter.

Actual pump price adjustments will depend on individual oil companies and fuel retailers.