Oil price hikes loom after US attacks Iran

Local pump prices may spike after the US and Israel launched strikes on Iran, which may cause a major oil supply disruption in the Middle East, according to industry players and analysts.

“The latest developments are seen to push prices much higher, despite the hefty risk premiums that were already factored in, because of the latest developments in the Middle East,” Leo P. Bellas, president of Jetti Petroleum, Inc., told BusinessWorld.

On Saturday, the US and Israel launched a wave of attacks on Iran, which resulted in the death of the latter’s supreme leader Ayatollah Ali Khamenei, Reuters reported. 

In retaliation, Iran launched missiles and counterattacks against Israel and US bases across the Gulf region including Bahrain, Qatar, and the United Arab Emirates, which are oil-producing countries.

As a net importer of crude oil, the Philippines is vulnerable to global crude price swings, which are triggered by geopolitical tensions.

Initial estimates from the Department of Energy (DoE) on Friday showed a potential increase this week of around PHP 1.10 per liter in gasoline, PHP 0.50 per liter in diesel, and PHP 0.90 per liter in kerosene, based on the four-day trading of the Mean of Platts Singapore last week, a benchmark used for refined oil products.

Rodela I. Romero, an assistant director at the DoE-Oil Industry Management Bureau, said on Friday that reports of massive US military buildup in the Middle East had contributed to expectations of price hikes this week.

Jetti’s Mr. Bellas said that this week’s oil price hikes may be higher than initial estimates as “it can be influenced by the much larger freight and premium that will be used in the cost buildup.”

He added that oil-producing countries hosting US military bases may be affected as well from energy infrastructure damage from Iran’s counterattacks.

“Early market reactions suggest that the US-Israel-Iran tensions could put upward pressure on oil prices, especially if the Strait of Hormuz becomes less stable, affecting oil trade routes,” Brigitte Carmel C. Lim, senior vice-present and chief operating officer, at Top Line Business Development Corp., said via Viber.

Ms. Lim said that this may translate to higher prices in the near term in the Philippines since local pump prices tracks international benchmarks.

She said Top Line is managing the volatility by “maintaining adequate inventory levels complemented with our price hedging strategies to lock in prices as a buffer against sudden market fluctuations.”

Reuters reported that several tanker owners, oil majors and trading houses have suspended crude oil, fuel and liquefied natural gas shipments via the Strait of Hormuz, citing trading sources.

Tehran had also closed navigation in the Strait of Hormuz. Around 20% of global oil, including from Saudi Arabia, the United Arab Emirates, Iraq, Kuwait and Iran, passes through the strait.

“With (Hormuz) being a critical chokepoint that can easily debilitate oil resources, then we can expect spikes on oil prices if a way forward will not be devised,” Raphael J. Cortez, diplomacy lecturer at De La Salle-College of St. Benilde, said.

Former Albay Rep. Jose Maria Clemente “Joey” S. Salceda said President Ferdinand R. Marcos, Jr. should give the go signal for the fuel subsidy program before the next round of pump price hikes.

“Every week of delay means billions of pesos in additional costs that fall disproportionately on jeepney drivers, tricycle operators, farmers, and fisherfolk,” he said in a post on Substack.

Mr. Salceda also urged the Congress to suspend or reduce the excise tax on diesel and kerosene under the Tax Reform for Acceleration and Inclusion Law to provide immediate relief to the transport and agriculture sectors, which he deemed were most exposed to fuel price shocks.

Last week, gasoline prices increased by PHP 0.60 per liter, while diesel and kerosene went up by PHP 1.20 per liter each. Year-to-date, price increases stand at PHP 4.80 per liter for gasoline, PHP 8.20 per liter for diesel, and PHP 6.20 per liter for kerosene.

Spillover effect

Aside from higher oil prices, the US-Iran conflict could slow deployment of overseas Filipino workers (OFWs) to the Middle East, analysts said.

“The US-Israel-Iran war will have a serious negative impact on the Philippines, especially if it engulfs the entire Middle East and is more prolonged than the surgical strike against Venezuela’s Maduro,” Foundation for Economic Freedom President Calixto V. Chikiamco said in a Viber message.

“It will definitely raise oil prices and slow down the deployment of OFWs to the Middle East,” he added.

Mr. Chikiamco said that the event is also likely to impact the already shaken consumer confidence back home.

“It was already shattered by the public works scandal, and therefore (could) further slow down gross domestic product growth and increase unemployment,” he added.

Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said that the country should closely monitor oil prices, global risk sentiment, and foreign exchange.

“This is a major geopolitical escalation, and markets are reacting the usual way — higher oil, a stronger dollar, and more volatility. For the Philippines, the risk isn’t direct conflict but spillovers: higher fuel prices, imported inflation, and pressure on the peso,” he said in a Viber message.

“If tensions drag on, volatility stays; if there’s quick de‑escalation, markets can stabilize just as fast. It’s a global shock — but one we need to manage carefully at home,” he added.

Francis M. Esteban, who teaches international studies at the Far Eastern University, said that the ongoing conflict should prompt the Philippines to diversify energy sources.

“This might be an opportunity for us to further explore renewable sources of energy, and other sources such as the ones newly discovered in Malampaya,” he said in a Facebook chat.

Last month, the Philippine government announced that it had discovered natural gas at Malampaya East-1, located 5 kilometers east of the existing Malampaya gas field off Palawan province.

The discovery is seen to bolster the country’s domestic energy supply, amid rising power demands. — Sheldeen Joy Talavera, Reporter with Justine Irish D. Tabile and Adrian H. Halili