Marcos downplays fallout from war

Philippine  President Ferdinand R. Marcos, Jr. on Wednesday said the economic fallout from the war between Israel and Iran would be “manageable,” citing stabilizing global oil prices after a ceasefire that eased concerns about the closure of the Strait of Hormuz, a vital shipping lane for the world economy.

“So far, there is no significant effect on the economy,” he told reporters in Capas, Tarlac in mixed English and Filipino, based on a transcript sent by his office.

“We looked at it and analyzed how things might unfold. We saw that the effect on the economy should be manageable. Of course, there would still be some impact if oil prices go up,” he added.

The President met with his economic team on Tuesday to assess the potential fallout from the Middle Eastern war, particularly on energy prices. Economy, Planning, and Development Secretary Arsenio M. Balisacan said the war’s impact was minimal and not alarming.

Brent crude briefly spiked to USD 79 per barrel amid geopolitical jitters but fell back to about USD 69 after US President Donald J. Trump announced a ceasefire, easing concerns over potential disruptions to the critical Strait of Hormuz shipping corridor, Reuters reported.

Brent had settled at its lowest since June 10 and since June 5 for the West Texas Intermediate before Israel launched a surprise attack on key Iranian military and nuclear facilities on June 13.

An oil price rollback is expected next week based on a two-day trading in the global market, Jetti Petroleum, Inc. President Leo P. Bellas told reporters in a Viber message.

“Basically, refined fuel prices tracked the movement of crude oil,” he said. “The decline in prices started with the easing of war risk premium on crude oil following the de-escalation of the conflict.”

Mr. Bellas said global oil prices “further went down” after the ceasefire deal, reducing the risk of supply disruption in the Middle East.

Based on the two-day trading of the Mean of Platts Singapore (MOPS), a benchmark used for refined oil products, diesel prices are expected to fall by PHP 0.80 to PHP 1.10 per liter, while gasoline prices may go up by PHP 0.10 or fall by PHP 0.20 per liter.

Mr. Bellas said the initial indications on domestic price movements could still change, depending on MOPS trading in the next three days.

“While tension has de-escalated, the situation in the Middle East is still fragile but holding so far,” he said. “Crude oil prices could be range-bound in the coming days.”

Mr. Bellas said refined fuel prices in Asia would be subject to “supply-demand fundamentals,” with demand expected to continue rising during the summer season, and supply expected to gradually increase with the return of refineries post-turnaround.

In a statement, the Department of Energy said it had conducted on-site monitoring activities at fuel retail outlets in Taguig City to ensure that consumers receive petroleum products at the right quantity and quality.

It also wanted to ensure that fuel retailers were complying with the staggered price hikes.

The Philippines, a net importer of oil, is highly sensitive to sharp fluctuations in global oil prices.

The government is monitoring signs of price gouging because many have raised prices despite declining global prices.

Mr. Marcos noted that with oil prices stabilizing, the government sees no immediate need to roll out additional fuel subsidies for sectors such as transport, fisheries and agriculture.

He added that assistance in the form of subsidies would only be considered if fuel prices spike again.

“The price of oil has not gone up,” he said in response to transport groups’ call for increased aid. “It went up for one day, then it came back down.”

While assistance programs remained in place, the government said more aid would depend on actual price movements and not short-lived fluctuations.

‘Bigger deal’

Oil companies in the Philippines must keep a minimum 30-day fuel inventory to help stabilize local supply. Should global crude prices breach the $80 per barrel threshold, fuel subsidies for public transport drivers and fisherfolk will be automatically triggered.

Local fuel retailers implemented the first tranche of the oil price increase on Tuesday, while some are implementing the second tranche either on Thursday or Friday.

The total price increase for the week is PHP 3.50 per liter for gasoline, PHP 5.20 for diesel and PHP 4.80 for kerosene.

The Energy department and economic managers are expected to continue monitoring global oil market developments for any signs of renewed volatility.

Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said the Israel-Iran war is a bigger deal than past wars that involved oil-producing countries, such as the Russia-Ukraine war.

“The Middle East is the major source of the [Philippines’] oil,” he said in a Viber chat. “Although any war involving oil-exporting countries will cause global supply disruptions, the conflict in the Middle East has more direct impacts on our oil supply.”

He said the ceasefire brokered by US President Donald J. Trump is “great news” for the economy and was the key factor behind Mr. Marcos’ assessment that the conflict would have minimal impact on the Philippine economy.

“In the long term, constant geopolitical instability calls [for] the need to diversify trade partners and supply chains, especially for critical goods such as oil,” he added.

Israel launched a surprise attack on Iran early this month, targeting key nuclear and ballistic missile facilities as well as senior military leaders. Washington joined the campaign on Sunday, targeting key nuclear sites in Iran.

Jose Enrique “Sonny” A. Africa, executive director at think tank IBON Foundation, called the government’s assessment “misleading” especially with the rising uncertainty and US involvement in the war.

“That kind of dismissiveness is telling of the lack of strategic thinking about the economy’s basic overdependence on imported energy,” he said via Viber. “The lack of long-term policy action is why these and other similar vulnerabilities will continue.” — Chloe Mari A. Hufana and Sheldeen Joy Talavera, Reporters