Oil price hikes seen continuing in H1

MANILA, Philippines — Consumers should brace themselves for further spikes in fuel costs throughout the first half of the year, as global oil prices are expected to continue their uptrend.

Sources closely monitoring oil prices told The STAR that expectations are for prices to follow a generally increasing trend through the second quarter.

The forecast uptrend is due to various factors, such as sentiments resulting from conflicts in the Middle East, as well as diversions of oil supply from the Red Sea to longer haul around South Africa, causing higher freight rates, and war risk insurance for Red Sea transits.

Ongoing supply restraint from OPEC+ would also likely remain this year.

Sustained increase in oil prices does not bode well for consumers, as weekly domestic pump price adjustments reflect movement in the international oil market.

The Philippines is purely dependent on imported fuel, both crude and finished products.

“It’s the volatilities that we have to deal with. Let’s hope that the geopolitical tensions are reduced. External factors are really the main causes,” Energy Secretary Raphael Lotilla told The STAR.

Under the Downstream Oil Industry Deregulation Act of 1998, the Department of Energy (DOE) is only authorized to monitor both the international and domestic price movements of petroleum products, as well as the compliance of businesses with national standards.

“We’re trying to address some of the infrastructure needs as far as power is concerned. As for fuel, of course, it will have to take a longer-term horizon. It includes things like, over the longer term, what will really be the ultimate direction for petroleum fuels,” Lotilla said.

“Although it’s long term, it will determine also what kind of investments will be coming into the sector. What we have seen is, the underinvestment globally in petroleum fuels has led to the shortage that we have right now,” he said.

Lotilla said there is currently a lot of uncertainties, that even the country’s energy plan has to have different scenarios because of the relatively unpredictable situation.

“It’s so difficult unlike before, although prices were cyclical, they would remain stable over a five- to 10-year horizon. But now it’s really volatile,” the energy chief said.

Domestic pump prices have so far gone up six times this year, with only two rollbacks.

Including today’s more than P1 per liter increases being implemented by local oil firms, year-to-date adjustment of gasoline, diesel and kerosene stands at a net increase of P6.05 per liter, P5.40 per liter and P1.50 per liter, respectively.

Based on DOE’s latest monitoring, prevailing retail prices of diesel and diesel plus products in Metro Manila from Feb. 13 to 19 ranged from P53.77 to P67.40 per liter and from P59.65 to P83.46 per liter, respectively.

Gasoline prices, meanwhile, ranged from P55.60 to P80.53 per liter, depending on the RON or research octane number of the fuel.

DOE Oil Industry Management Bureau assistant director Rodela Romero, however, told The STAR that there is no single bullet to address the issue of high fuel prices.

She said mitigating measures include strict compliance of players with quality and quantity of products, continued promotion of alternative fuels, energy conservation campaigns, as well as support of fuel subsidy programs by the Department of Agriculture and Department of Transportation when Dubai crude price reached $80 per barrel.

Over the long term, Romero said the country should be able to explore indigenous resources compatible with its needs.

She said the country must also be aggressive on programs for renewable energy and biofuels to lessen its dependence on imported fuels, while energy efficiency and conservation programs should be a way of life.

“We do have these now, but we need to be more aggressive,” Romero said.

“And then in the short term, if prices would really increase since prices are really volatile, we do have targeted relief programs (for) vulnerable sectors like transport, farmers and fisherfolk; and there are the corporate social responsibility programs of oil companies,” she said.

On his end, Lotilla believes the country’s shift to electric vehicles (EV) would play a crucial role in addressing future spikes in oil prices.

The Comprehensive Roadmap for the Electric Vehicle Industry sets a minimum 10 percent target EV share for all sectors – excluding EV trucks – by 2040 under the business-as-usual scenario.

The aggressive clean energy scenario, on the other hand, sets a more ambitious target of at least 50 percent of all fleets by 2040.

“That also responds to customer preferences and obviously their savings generated from the customer’s perspective when they shift to EV,” Lotilla said.

“But it’s still the infrastructure that we have to roll out because the private sector, at this time, is not going big on infrastructure like charging stations. That’s why it is important that the emphasis can be on mass transport, because that’s also one way of dealing with the traffic congestion that adds to cost, travel time, fuel intake and so on,” he said.

Fuel prices up today

Oil companies will implement an increase in pump prices today.

In separate advisories, oil prices have increased by P1.60 per liter for gasoline, P1.10 per liter for diesel and P1.05 per liter for kerosene.

The hike will take effect at 6 a.m. with Jetti, PetroGazz, SeaOil and Shell. Meanwhile, Caltex and CleanFuel will implement the increase by 12:01 a.m. and 4:01 p.m., respectively.

The increase was forecast by Romero last Friday, who estimated an oil price increase of around P1.10 to P1.50 per liter for gasoline, diesel and kerosene. — Patrick Miguel