We have always imported 100% of our petroleum requirements. So why is it that whenever a price shock happens, we don’t quite know what to do?
The Philippines’ reliance on oil imports has made us particularly vulnerable to geopolitical shocks. What happened in the past fortnight between Israel and Iran – and, well, the United States – was something we did not hope to see, considering its impact on pump prices, but also, it was something that we had discussed before. Whenever anything happens in the Middle East, our attention turns to the pumps. The beginning of the Ukraine-Russia war also had an impact. The pandemic, of course, saw prices go up to as high as PHP 80 per liter. Correct me if I’m wrong, but that was the highest we’ve seen in recent history.
And yet, we always seemingly get caught in a bind as to what to do. The sudden jump of up to PHP 5 per liter last week brought with it the usual litany of complaints and solutions from drivers of both private and public vehicles, as well as from businesses. (From my vantage point, it’s quite refreshing to see the media pay a little more attention to the effects on the prices of basic goods.) And then there are the usual suggestions, from suspending taxes imposed on fuel, to providing a fuel subsidy, to increasing public transport rates. And then there’s the pushback, about how that would reduce government revenue or be inflationary in the long run. And so it goes.
So why is it that whenever a price shock happens, we don’t quite know what to do?
And is it really as easy as, say, repealing the Oil Deregulation Act, which fully gave to the market the ability to set pump prices in exchange for opening the doors for more players to enter the field? Likely not.
For one, if we’re so vulnerable to these shocks, what’s stopping us from having a much larger crude stockpile that we can dip into in these times? Some would say prices will still be astronomical anyway because the government no longer has a hand in setting prices, much the way the National Food Authority has some sway over how much the rice it sells costs. Petron was privatized, removing a key conduit for “cheaper” gas. But I don’t think it’s as easy as nationalizing it again, considering how these entities have to be technologically up-to-date to be competitive.
A proposal to provide the president “standby powers” to suspend the imposition of excise tax and value-added tax on fuel products is encouraging, as it removes a significant hurdle to these calls – that the taxes are law, and therefore can only be removed by an act of Congress. But I’m not sure anyone in power is willing to give up such a significant amount of government revenue to placate vehicle users for an indeterminate amount of time.
This past week, I was asked by the media about how the government can intervene in light of this oil price shock. Unfortunately, my answer is just to manage expectations. Unless we find an oil field within our territorial waters that we can truly call our own, we will remain at the mercy of external developments. (And judging how the Israel-Iran conflict “ended”, there will be more on the horizon. Stay tuned, I’m afraid.) For us in supply chain, we should have factored situations like these in our plans, and have made arrangements with our logistics providers and other partners in case, so we remain competitive. But that still leaves smaller players without the leverage to make such schemes vulnerable to these price shocks.
There are other ways the government can intervene, but these will be long-term… and these will be somewhat predictable, too. If we can’t reduce transport costs through fuel prices, we reduce them elsewhere. Better infrastructure, better regulations, better policies, all to reduce friction and allow for more seamless movement from factory to warehouse to store. A challenge, considering we’re an archipelago, but if Indonesia can achieve lower logistics cost despite being a larger archipelago, then so should we.
Also, the Department of Energy should double-down in leading the switch to other forms of energy. For one, we can’t always rely on fossil fuels, not just because of prices but because of its environmental impact. We have begun shoots of growth in electric vehicles – a lot of them, if you ask those who bought EVs to dodge number-coding schemes – but we should double that with support for charging infrastructure everywhere in the country. We should continually invest in mass public transport so consumers can ditch the cars. Ditto with more walkable, bikeable cities. In the longer term, maybe we can revisit nuclear energy to supply energy needs for industries. A lot of these are long-term solutions, though, so we’ll have to suffer the shocks for a while.
2025 Supply Chain Philippines Excellence Awards: SCMAP’s annual awards honoring the most impactful work in Philippine supply chain returns. We are now open for submissions for projects in three categories: operational excellence, digitalization, and sustainability. Submissions are accepted until July 31, with the awards announced at the 2025 SCMAP Supply Chain Conference on September 4-5. Learn more and take part at scmap.org/awards.
Henrik Batallones is the marketing and communications director of SCMAP, and editor-in-chief of its official publication, Supply Chain Philippines. More information about SCMAP is available at scmap.org.
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