Oil Prices Still Climbing; Diesel May Hit P170 Per Liter

Despite the country’s productive talks with Iran, oil prices are still rising, with diesel and gasoline on track to approach P170 and P120 per liter, respectively, next week.

An industry source estimated a price hike of P17 to P19 per liter for diesel and P3 to P5 for gasoline on April 7, reflecting four days of trading in the Mean of Platts Singapore.

“Diesel supply continues to tighten as demand remains high, pushing the prices of middle distillates much higher relative to gasoline,” the source said.

Although crude supplies from the Middle East may now be secured, the impact on domestic fuel prices is another story.

“Even if the war ends today, it will take the rest of the year or even the next to fix the damaged refineries and loading ports and restart refineries and production facilities,” The Philippine STAR business columnist Boo Chanco said.

“That means supply will not normalize soon and with that, prices will remain high. For now, I would say the free pass we got will have little or no effect on domestic prices until supply flow normalizes,” he added.

Toll-Free Passage

The Philippines has received assurance from Iran that it would allow the safe passage of Philippine-flagged vessels through the Strait of Hormuz, the Department of Foreign Affairs (DFA) said on Thursday, April 2.

The assurance came after DFA Secretary Ma. Theresa Lazaro spoke with Iranian Foreign Minister Seyed Abbas Araghchi, with the two top diplomats discussing energy supply security and the safety of Filipino seafarers.

The DFA also clarified that the passage would not involve any toll amid reports that Iran is planning to impose at least $1 per barrel, estimated to be around $2 million for each vessel transiting the Strait of Hormuz.

“During the call, the Iranian foreign minister assured the secretary that Iran will allow the safe, unhindered and expeditious passage through the Strait of Hormuz of Philippine-flagged vessels, energy sources and all Filipino seafarers,” the DFA said in a statement.

Lazaro described the call as “productive,” saying they reached a “positive understanding” to ensure the safety of seafarers and the security of the Philippines’ energy needs.

The DFA said the assurances would shore up the country’s energy security.

“Given that the Philippines imports the majority of its energy requirements from the Middle East, these assurances from Iran will facilitate the steady delivery of critical oil and fertilizer supplies to the Philippines,” the DFA said.

The Philippines imports almost all of its crude from the Middle East, with Saudi Arabia its biggest supplier, making it vulnerable to oil price shocks and supply disruptions.

“On question regarding the reported toll, there is none,” DFA spokesperson Analyn Ratonel said in a text message to reporters.

Both foreign ministers, the DFA said, affirmed their commitment to “maintaining excellent relations and achieving lasting peace through continued dialogue and diplomacy.”

Tehran maintains a de facto blockade on the critical maritime chokepoint following the joint military operations mounted by Israel and the United States on Feb. 28, which targeted its nuclear sites and killed its Supreme Leader Ayatollah Ali Khamenei.

The blockade on the waters has since sent energy markets into shock, with rising oil and fuel prices prompting governments to implement austerity measures.

Last week, President Marcos declared a state of national energy emergency to address disruptions in fuel supply and stabilize the country’s energy sector. 

Positive

Industry experts told The Philippine STAR that the latest development would allow the Philippines to secure additional fuel supplies amid the energy emergency.

“Iran’s guarantee of safe passage is a positive development as it helps ease immediate concerns over physical supply disruptions,” said Brigitte Carmel Lim, senior vice president and COO of Top Line Business Development Corp.

While the Philippines was not sourcing oil from Iran, economist Bienvenido Oplas Jr. said the assurance would “significantly help” since imports from other Middle Eastern countries still have to pass through the Strait of Hormuz.

Oplas, however, noted that Dubai crude remains elevated, with futures prices hovering around $125 per barrel. – With additional reports from Reuters and Michael Punongbayan