Oil prices may climb with tensions, but bearish factors persist — DoE official

By Sheldeen Joy Talavera, Reporter

THE TENSION between Israel and Iran could cause upward adjustments in the prices of petroleum products if it continues to escalate, but other factors such as oil production still weigh down possibilities, an official from the Department of Energy (DoE) said on Wednesday.

“If the tensions continue to escalate, expect increases in the prices of petroleum products but there are lingering bearish factors that pull the prices down such as increased oil production, economic indicators and supply and demand outlook,” DoE Oil Industry Management Bureau (OIMB) Assistant Director Rodela I. Romero said in a Viber message.

Oil prices rose by more than 2% on Wednesday as the tensions in the Middle East raised concerns that it could escalate and disrupt crude oil output from the region, following Iran’s missile attack on Israel, Reuters reported.

In separate advisories on Monday, oil companies said pump prices would climb by P0.45 per liter of gasoline, P0.90 per liter of diesel, and P0.30 per liter of kerosene.

This marks the second straight week that prices of gasoline and diesel have increased.

The latest adjustments bring the year-to-date net increases of gasoline and diesel prices to P6.40 per liter and P2.85 per liter, respectively. Kerosene has a net decrease of P6.05 per liter.

Ms. Rodela said that the oil price hike has already factored in the geopolitical conflict in the Middle East, along with the US Federal Reserve rate cut, the withdrawal in the US inventories, and production cut of the Organization of the Petroleum Exporting Countries and its allies, also known as OPEC+.

“On the increase yesterday (Oct. 1), part of the reasons is the fear over escalated tension due to the Israel and Iran conflict because of additional premium on the cost of the petroleum products plus the potential supply disruption,” she said.

OIMB Director Rino E. Abad said that the agency bases its reference on Mean of Platts Singapore price benchmarks, hence the actual movement of the daily price will dictate the adjustment next week.

“The daily price movement for the past two days indicated a decreasing trend, hence the estimate of possible decrease of price adjustment next week, but still subject to the price movements in the next three days of the week,” Mr. Abad said.

The Philippines is a net importer of petroleum products. In the first half of 2023, the country imported 3.476 billion liters of crude oil, up 23.7% from 2022, data from the DoE showed.

Gerry C. Arances, executive director of the Center for Energy, Ecology, and Development, said that the possible rise in oil and diesel rates due to the Middle East conflict puts off-grid areas in a dire situation as they rely on diesel-powered plants for electricity.

“The Philippine government must immediately implement measures to relieve consumers from fuel price hikes, especially in transport, and in electricity in off-grid areas. If circumstances take the turn for the worse, price caps should also be put in place,” he said in a Viber message.