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Freight costs could rise 9% to 14% due to higher oil prices, with goods shipped to the Visayas and Mindanao facing the biggest price increases
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Air transport costs could climb 14.4% and land transport 9.8%, with sea and air carriers already nearing operating losses
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Logistics firms on fixed-price contracts are at risk, as higher fuel costs could wipe out their profit margins
Freight costs in the Philippines could rise by 9% to 14% as higher oil prices push up transport and production costs, according to the Philippine Institute for Development Studies (PIDS).
PIDS senior research fellow Jose Ramon Albert said the increase could disproportionately raise the prices of goods shipped to the Visayas and Mindanao. Across the economy, a worst-case oil price shock could add as much as P1.3 trillion to production costs, with aviation and basic metals among the most exposed industries.
Albert presented the analysis at PASIAWORLD 2026, the annual supply chain conference of the Procurement and Supply Institute of Asia (PASIA), on October 9, 2026, at the SMX Convention Center Manila in Pasay City.
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Transport among hardest-hit sectors
Petroleum makes up 23% of air transport costs and around 12% to 13% of land and water transport costs, making the freight sector highly sensitive to fuel price swings.
Under the baseline scenario, air transport costs could rise by 14.4% and land transport by 9.8%. In the worst-case scenario, air transport costs could jump by more than 30%.
“But for fixed price contracts in construction or logistics, that difference is the profit margin,” Albert said, warning that businesses locked into contracts without price adjustment clauses would feel the most pressure.
He also called for better data collection on land transport to give a clearer picture of the sector’s exposure to fuel prices.
Sea and air carriers near losses
A separate PIDS analysis, using the Annual Survey of Philippine Business and Industry, found that transport had an average fuel intensity of 22%, far above the 1.56% aggregate ratio across about 250 four-digit industry codes. Total firm fuel expenses were estimated at P323.6 billion, separate from the economy-wide production cost estimates.
The analysis flagged industries that had reached or crossed the point where the shock could push firms into operating losses by the second quarter of 2026. These include passenger air transport, sea transport and marine fishing.
About 250,000 workers were employed in industries operating near the full shock threshold, including around 91,500 in transport and 76,000 in affected manufacturing subsectors.
Other fuel-intensive industries include marine fishing at 34.5% and mining at 10.3%. Manufacturing averaged 3.6%, though some subsectors such as cement, glass and paper reached double digits.
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Up to P1.3 trillion in added costs
Albert said the added cost burden to the economy could reach P550 billion under a baseline scenario, P942 billion if the crisis drags on, and P1.3 trillion in the worst case. The estimates are based on three oil price scenarios developed by the Asian Development Bank (ADB).
The baseline assumes oil at about $100 per barrel until June, which could cut 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. The worst case assumes oil rising to $125 per barrel, with the crisis lasting until March 2027.
He said higher production costs could squeeze business margins, be passed on to consumers through higher prices, or both.
The study used the economy’s 2018 input-output table, which traces how industries buy from and sell to one another. Albert cautioned that the data may not fully reflect changes since the COVID-19 pandemic.
Other industries affected
Under the baseline scenario, production costs could also rise by:
- 14.6% for basic metals
- 11.8% for cement
- 9% for electricity generation
- 5.8% for paper and packaging
- 3.8% for electronics manufacturing
- 1.9% for food products
Basic metals, where petroleum accounts for about 25% of production costs, could see costs rise more than 30% in the worst case.
The 1.9% rise for food products carries a large peso impact. Food manufacturing is a P6.2-trillion sector, so the increase means about P118 billion in added expenses that could eventually reach retail prices.
A 9% rise in power generation costs would add pressure to industrial, commercial and residential power bills. Higher cement costs could also threaten fixed-price government infrastructure contracts under the Build Better More program, with overruns spilling over into private construction and related supply chains.
Impact on consumers
Lower-income households are likely to be hit harder because they spend a larger share of their budgets on food, which relies on fuel-intensive supply chains. Albert estimated the baseline scenario could push about 1.3 million more Filipinos into poverty, which he said helped prompt government aid for lower-income groups.
PIDS recommendations
Albert called for targeted relief for vulnerable businesses instead of a blanket subsidy. He urged the government to review transport charges, protect infrastructure projects from rising fuel and cement costs, and coordinate measures on electricity costs.
For the medium term, he recommended working capital support for micro, small and medium enterprises and faster use of renewable energy to reduce 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, build those pressures into contract pricing, and engage the government on sector-specific relief. —Michael Barcas
