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A worst-case oil price shock could raise production costs across the Philippine economy by as much as P1.3 trillion, with basic metals and aviation among the industries most vulnerable to rising petroleum prices, according to an analysis by the Philippine Institute for Development Studies
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Other sectors most affected are land transport and electricity generation
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Higher freight and energy costs could push up the prices of goods, with consumers in the Visayas and Mindanao potentially facing a disproportionate impact
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PIDS senior research fellow Jose Ramon Albert called for targeted relief, working capital support for small businesses, better transport data, protection of infrastructure projects from escalating input costs, and faster integration of renewable energy
A worst-case oil price shock could raise production costs across the Philippine economy by as much as P1.3 trillion, with basic metals and aviation among the industries most vulnerable to rising petroleum prices, according to an analysis by the Philippine Institute for Development Studies (PIDS).
Jose Ramon Albert, senior research fellow at PIDS, said the estimated cost burden could reach P550 billion under a baseline scenario and P942 billion if the crisis were prolonged, based on three oil price scenarios developed by the Asian Development Bank (ADB).
The analysis was presented during PASIAWORLD 2026, the annual supply chain conference organized by the Procurement and Supply Institute of Asia (PASIA), on October 9, 2026, at the SMX Convention Center Manila in Pasay City.
Albert explained that higher production costs could erode business margins, be passed on to consumers through higher prices, or both.
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The baseline scenario assumed oil prices of about $100 per barrel continuing until June. Albert said this could trim Philippine gross domestic product growth by 0.3 percentage point and add 0.6 percentage point to inflation. A prolonged conflict could roughly double the damage, while the worst-case scenario assumed oil prices rising to $125 per barrel and the crisis lasting until March 2027.
The study drew on the economy’s 2018 input-output table, which maps the links between industries by tracing how sectors buy from and sell goods and services to one another. Albert cautioned that the data may not fully reflect changes in the economy since the COVID-19 pandemic.
Steel, aviation, cement among most exposed sectors
For industries, petroleum accounts for about 25% of basic metals production costs and 23% of air transport costs. Land and water transport have petroleum exposure of around 12% to 13%.
Under the baseline scenario, production costs could increase by 14.6% for basic metals and 14.4% for air transport. Cement costs could rise by 11.8%, land transport by 9.8% and electricity generation by 9%.
Under the worst-case scenario, costs for basic metals and air transport could rise by more than 30%, Albert said.
“But for fixed price contracts in construction or logistics, that difference is the profit margin,” he said, warning that higher input costs could put pressure on businesses locked into contracts that do not allow prices to adjust.
Other industries would also face higher costs. Paper and packaging costs could rise by 5.8%, electronics manufacturing by 3.8% and food products by 1.9% under the baseline scenario.
Food prices, freight rates
While the increase for food products is relatively small in percentage terms, Albert said it could have a substantial peso impact because of the size of the industry.
He cited food manufacturing as a P6.2-trillion sector, estimating that a 1.9% increase in production costs would translate to about P118 billion in additional expenses that could eventually feed into retail prices.
Higher transport and electricity costs could spread the impact of the oil shock throughout the economy.
Albert estimated that freight costs could increase by 9% to 14%, potentially raising the prices of goods shipped to the Visayas and Mindanao disproportionately.
He also called for better data collection on land transport to provide a clearer picture of the sector’s exposure to fuel price movements.
Electricity generation costs could rise by 9% under the baseline scenario, adding pressure to power bills for industrial, commercial and residential consumers.
Higher cement costs could also threaten fixed-price government infrastructure contracts under the Build Better More program. Cost overruns in public works could spill over into private construction and related supply chains, Albert said.
Separate analysis flags vulnerable businesses
A separate PIDS analysis using the Annual Survey of Philippine Business and Industry examined fuel expenses across about 250 four-digit industry codes. It estimated total firm fuel expenses at P323.6 billion, with an aggregate fuel-intensity ratio of about 1.56%.
Albert cautioned that the overall average masks significant differences among industries. Transport had an average fuel intensity of 22%, marine fishing 34.5% and mining 10.3%. Manufacturing’s average was 3.6%, although some subsectors, including cement, glass and paper, had fuel intensities in the double digits.
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The separate analysis also identified industries that had reached or crossed thresholds at which the shock could push firms into operating losses by the second quarter of 2026. Albert cited passenger air transport, sea transport and marine fishing among the affected industries.
About 250,000 workers were employed in industries exposed to operating near the full shock threshold, according to his presentation. Of these, around 91,500 were in transport and another 76,000 in affected manufacturing subsectors.
The P323.6-billion estimate of firms’ fuel expenses is separate from the economy-wide estimates of additional production costs under the three oil shock scenarios.
Consumer impact
The oil shock is likely to affect lower-income households more severely because they spend a larger proportion of their budgets on food, whose supply chains are fuel-intensive.
His analysis estimated that the baseline scenario could push about 1.3 million additional Filipinos into poverty. In his presentation, he said the impact on household purchasing power had helped prompt government assistance for lower-income groups.
Albert called for targeted relief for vulnerable businesses rather than a uniform subsidy for all firms. He also urged the government to help protect infrastructure projects from higher fuel and cement costs, review transport charges and coordinate measures to address electricity costs.
For the medium term, he recommended working capital support for micro, small and medium enterprises and faster integration of renewable energy to reduce the country’s dependence on imported fuel.
“The bottom line for businesses is straightforward. The sectors most exposed are their input suppliers. Steel, cement, transport, and energy,” Albert said.
He advised businesses to plan for sustained cost increases, factor those pressures into contract pricing and engage the government on sector-specific relief measures.—Michael Barcas
