Truce seen bringing brief oil price relief
After climbing sharply for five straight weeks, local pump prices could finally hold steady or even drop slightly next week following the ceasefire declared between the United States and Iran, an industry player said on Wednesday.
Any easing of prices, however, could be short-lived given market uncertainties, another source said.
A Department of Energy (DOE) document drawing up different crisis scenarios—and prepared on April 7 or before the ceasefire—showed that pump prices could reach as high as P230 per liter for diesel and P175 per liter for gasoline should the attacks continue and damage the energy infrastructure in the Middle East.
But news of the two-week truce on Wednesday provided some market relief, according to Jetti Petroleum president Leo Bellas.
This could lead to “a significant unwinding of the war premium that was incorporated in prices and has built up due to the conflict,” Bellas told the Inquirer.
The market can expect a “sharp decline” in crude oil and refined fuel prices from inflated levels, he said, although they would still be above normal due to continuing supply issues.
Nonetheless, the country’s motoring public could expect a rare break from surging oil prices, Bellas said.
“For domestic pump prices, the movement next week could make a U-turn from a potential increase as tracked from the first two days MOPS (Mean of Platts Singapore) average, to a possible status quo to rollback due to the easing down of MOPS prices,” he added.
MOPS is a key pricing benchmark for refined petroleum products.
Market uncertainties
Energy law expert Jose Layug Jr. expressed optimism that the “market will react positively to lower the price.”
Global benchmark Brent crude settled at $109 per barrel on Tuesday, before quickly dropping below $100 per barrel following the supposed truce.
On the other hand, Brigitte Carmel Lim, senior vice president and COO of Cebu-based fuel firm Top Line, said that while this is a “positive development” that could temper prices, “uncertainty in the market is likely to persist.”
She also said that the impact on local petroleum products will not be felt right away, with changes seen in about one to two weeks.
“While this could provide some short-term easing, overall price direction will still depend on how the situation unfolds in the coming days,” Lim also told the Inquirer.
Bellas echoed this, saying: “Markets may bounce back in [a] day or two after digesting the extent of the current damage to infrastructures and lead time to restore production and exports, and after assessment of the strength or fragility of this declared ceasefire.”
Despite the ceasefire, the country remains on cautious footing, with Energy Secretary Sharon Garin saying it remains unclear if it would provide an immediate reprieve.
“Anything can happen,” Garin told lawmakers at a House of Representatives hearing on the oil shock on Wednesday.
“Supply, we have stable supply but we don’t know, we don’t have any predictability as to where the price will go or the supply will go […] Supply can go up, it can be under control or it can go down. The war can escalate or de-escalate,” she also said.
President Marcos late last month declared a national energy emergency to empower the government to secure fuel supplies and shield the economy from drastic fuel price hikes.
This week, fuel retailers have implemented another round of double-digit increases in diesel, ranging from P17.95 to P19.80 per liter. Gasoline price hikes hit P4.90 to P5.90.
‘Most vulnerable’
These increases have pushed fuel prices to historic highs since the conflict began on Feb. 28, with diesel prices hovering around P170 per liter and gasoline nearing P120 per liter.
Garin said the Philippines has faced the steepest percentage increase in fuel prices, but noted that this does not necessarily mean the country has the highest absolute pump rates globally.
“We are just the most vulnerable in terms of what’s happening now,” she said, attributing current pump prices due to added logistics fees on top of the per barrel costs. “Ninety-four percent of that price is on the cost of goods, which means not only how much the barrel is.”
DOE price scenarios
It also remains unclear when fuel prices will return to pre-Middle East war levels, with damage to energy infrastructure in the region expected to prolong the elevated prices, Garin said.
“If it ever goes back to P100 or below, it will take some time,” she said.
The DOE briefer showed diesel pump prices could soar to a range of P185 to P230 per liter and from P140 to P175 for gasoline, a scenario that would warrant a “full activation of strategic response” from the government.
It projected that the Dubai crude could average $180-$220 per barrel if the Strait of Hormuz, a critical chokepoint for global energy supplies, remains closed for 90-180 days.
Meanwhile, a de-escalation of hostilities in the oil-rich region may ease diesel prices to around P90-P105 per liter and P72-P82 for gasoline, the document showed.
A status quo in the conflict, where hostilities remain at pre‑ceasefire levels for 60-90 days, would push diesel pump prices to P130-P170 per liter and gasoline to P88-P125, it added.
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