By Sheldeen Joy Talavera, Reporter
THE PHILIPPINE government and oil firms are already build up fuel inventories for May as early as now, the Department of Energy (DoE) chief said, because the Iran war enters its third week and continues to threaten global oil supply.
Energy Secretary Sharon S. Garin said that the country’s fuel supply is sufficient to cover demand until end of April but oil firms are actually attempting to secure stocks for May.
“It’s a liberalized industry. So, oil firms are speculated to be certain that we’ve stocks, a minimum of 15 days. But actually, they surpassed that. So, they’re ordering now for his or her May stocks,” Ms. Garin told ANC’s Headstart on Wednesday.
Currently, oil firms are required to take care of not less than a 30-day inventory of crude oil and a 15-day inventory of finished petroleum products.
Because the Philippines has very limited domestic oil production to cover demand, local fuel retailers mostly import their supply from the Middle East, the world’s top oil-producing region that’s currently being disrupted by the Iran war.
Nearly all of the finished petroleum products come from Asian countries equivalent to Japan, South Korea, and China, but crude oil can be sourced from the Middle East.
“The stocks for May are speculated to be delivered in April and so they’re (oil firms) attempting to lock that in. It’s early but we’ve to do it early in these times. So, oil firms, including the federal government, are working on the provision for May,” Ms. Garin said.
As a precautionary measure, the federal government has also moved to help fuel firms by directing the oil and gas exploration arm of state-run Philippine National Oil Co. to acquire not less than two million barrels of oil from global markets.
“Because there could be risks that their source won’t deliver, so the federal government can be procuring. So, a million or two million stocks, so we’ve a buffer,” Ms. Garin said.
“Just in case any of our oil firms fail to acquire, we’ve a reserve for May. In order that’s what we’re doing now. We’re slowly locking in some offers. Little by little, we’re attempting to be certain that May is roofed,” she added.
Apart from existing suppliers, the Energy chief said the Philippines can be tapping other countries in Asia like Malaysia, Brunei, and India. Additionally it is considering sourcing from other markets equivalent to the US, Canada, Russia, or South American countries.
While fuel prices could be cheaper within the latter countries, Ms. Garin said that the top cost of transportation will likely be “longer and slightly costlier” as deliveries could take as much as a month.
TIGHT SUPPLY
Leo P. Bellas, president of Jetti Petroleum, Inc., told BusinessWorld that “just about all oil firms are doing their best to secure cargoes for May.”
“Volume being secured is, on the minimum, based on each oil company’s monthly sales,” he said.
Nonetheless, increasing the stockpiles stays difficult, because it is constrained by the supply of products out there.
“Supply is becoming very tight due to run cuts imposed by refineries as a result of lack of feedstock, and export ban,” Mr. Bellas said.
“Assuming there isn’t a supply problem, the priority will likely be the capital requirement as a result of higher cost of importation. The worth of diesel has greater than doubled already versus prior to the Middle East crisis, and gasoline is now higher by greater than 70%,” he added.
Robert Dan J. Roces, an economist at SM Investments Corp., said build up inventories is “a prudent and proactive step” to cushion the country from potential supply disruptions amid the continuing geopolitical conflict.
“By increasing buffers and exploring alternative suppliers, oil firms can higher ensure continuity of supply and reduce the chance of sudden shortages,” he told BusinessWorld in a Viber message.
Within the short term, fuel inventory buildup should help mitigate global shocks and stop abrupt spikes in local pump prices.
“Over the long term, the main focus should shift toward strengthening energy security — equivalent to diversifying import sources, expanding strategic petroleum reserves, and accelerating investments in domestic and renewable energy — to scale back the economy’s vulnerability to external oil shocks,” Mr. Roces said.
Several oil firms are mountain climbing pump prices this week, pushing diesel costs beyond P100 per liter. To alleviate pressure on consumers, some oil firms staggered the implementation of the increases in two to a few tranches.
Asked how long the Philippines may experience elevated fuel prices, Ms. Garin said: “All of it depends upon the war.”
“The worst part is that the results will likely be longer. The costs will take longer to go down. The logistics — all of the oil fields that they bombed — it would take time to organize those,” Ms. Garin said. “Possibly one other six months after the war, slowly, it would return to normal — the costs and logistics.”