Racing against surging fuel costs, the government is moving to secure up to 2 million barrels of additional oil supply as global prices hit record highs, even as economic managers warn that escalating tensions in the Middle East could further disrupt energy flows and drive prices even higher.
Thus, the government is wagering that still higher oil prices or the stockpiling effort will lead to massive losses if prices start to fall.
Speaking at the InvestPH seminar hosted by the local bourse earlier today, Finance Secretary Frederick Go said the move is part of efforts to cushion the country from supply disruptions and price volatility triggered by tensions involving the United States, Israel and Iran.
“The primary objective, of course, is to create that buffer stock — additional buffer stock. Also, when you put out a big order into the global market, the belief is you should be able to get some economies of scale and procure at lower prices,” he said.
The Senate, meanwhile, approved a priority measure granting President Marcos Jr. emergency powers to suspend or reduce excise taxes on petroleum products to cushion the inflationary effects of the ongoing oil crisis stemming from escalating tensions in the Middle East.
The approval came a day after its counterpart bill hurdled the House of Representatives. Both measures were certified as urgent by the President.
Senate Bill 1982 reached the plenary on Monday for floor debate before being unanimously approved with 17 affirmative votes a day later.
The Senate-approved measure aims to authorize Marcos to suspend or reduce the excise taxes on petroleum products during periods of high global prices or “when the average Dubai crude oil price based on Mean of Platts Singapore has reached or exceeded $80 per barrel for one month preceding the issuance of the suspension or reduction order.”
The measure mandated that the suspension shall not exceed one calendar year and shall be exercised only until 31 December 2028.
Price spikes persist
The planned stockpiling comes as the Strait of Hormuz — through which about 20 percent of global oil supply passes — faces disruptions, raising concerns over sustained spikes in crude prices and tighter global supply.
The President said last week the Philippines currently maintains an oil buffer equivalent to around 50 to 60 days of national demand, providing some protection against short-term shocks while allowing flexibility to source supply from multiple producers.
The Middle East conflict has also exerted pressure on the local currency, which hit record lows three times over the past week, peaking at P59.87 per US dollar on Monday. Analysts have noted that rising inflationary pressures and peso depreciation could limit the Bangko Sentral ng Pilipinas’ (BSP) room for further monetary policy easing.
Go, who sits on the BSP’s Monetary Board, said the government is closely monitoring developments in global oil markets, particularly price movements and the duration of the conflict, which will determine the extent of policy responses.
“The Monetary Board, in its last policy meeting, decided on easing,” Go said.
“We also made a statement that we are reaching the end of the easing cycle. If oil prices remain high — if oil prices remain elevated and the situation persists for some time — the Monetary Board will most likely have to consider tightening.”
The Monetary Board approved a 25-basis-point reduction in the central bank’s key policy rate last February — the second such cut in three months — as tepid economic growth linked to the flood control scandal continued to weigh on the Philippines’ economic outlook.
As oil prices continue to surge, Go, who has previously said the government is pushing for a temporary reduction in excise taxes on fuel, noted that action will depend on Congress, and that it may still be too early to decide.