Fuel prices seen rising further as Middle East conflict escalates

By Sheldeen Joy Talavera, Reporter

FUEL PRICES could rise further in the coming weeks as the intensifying conflict in the Middle East keeps global oil markets under pressure, analysts said, as Filipino motorists brace for another increase of more than P4 per liter this week.

In an advisory on Monday, the Department of Energy (DoE) said gasoline prices are set to increase by P5.68 per liter, diesel by P4.31 per liter, and kerosene by P4.62 per liter.

The increases will push pump prices in Metro Manila to more than P100 per liter, with gasoline reaching P107 per liter, diesel plus P111, and kerosene nearly P141.

The Philippines is highly vulnerable to price swings in the global oil market as it imports most of its fuel needs. About 98% of the country’s crude oil imports come from the Middle East.

Leo P. Bellas, president of Jetti Petroleum, Inc., said global oil prices are expected to increase as the Middle East conflict intensifies and threatens to disrupt supply.

“Asian prices can be affected by the consequent curtailment of refinery feedstock due to the supply disruption, and the constrained availability of refined products supply from the Middle East and Russia would cause diesel and gasoline to rise further,” Mr. Bellas told BusinessWorld.

“The continuing supply concern would lead to further volatility in prices with increasing upside risk for both crude and refined products globally,” he said.

Saudi Arabia shut down its East-West oil pipeline last week after drone attacks, threatening to worsen the global supply crunch.

Reuters on Monday reported Brent climbed almost 3% as new strikes on Saudi Arabia and on ships in the Gulf strained nerves, after an attack on a Saudi oil pipeline and an advance by Yemen’s Houthis threatened to worsen the wartime disruption to global energy supplies.

With shipping through the strait and the Bab el-Mandeb under threat, analysts fear oil prices could stay elevated for a lengthy period, stoking inflation globally.

Brent futures were last up 2.5% at $107.18 a barrel, having gained almost 9% last week, while US crude rose 2.6% to $102.62 a barrel.

“The shutdown of Saudi Arabia’s East-West pipeline adds another layer of pressure to an already tight global oil market, particularly because the pipeline has been an important alternative export route amid the disruptions in the Strait of Hormuz,” Top Line Business Development Corp. Senior Vice-President and Chief Operating Officer Brigitte Carmel Lapasaran Lim said.

Ms. Lim said the latest development could trigger upward pressure on domestic pump prices if the disruption persists.

SUSPENSION OF EXCISE TAXES?
Energy Secretary Sharon S. Garin confirmed that Dubai crude prices have already breached the threshold that could trigger a proposal to suspend fuel excise taxes.

“As of last week, Friday, actually, we have already officially communicated that the average has hit the limit already,” Ms. Garin said on the sidelines of an event on Monday.

“So that’s for them (Office of the President) to decide whether to do suspension — total or no suspension, or partial suspension,” she added.

The Department of Finance (DoF) can propose the suspension of the excise tax on LPG and kerosene if the 30-day average of Dubai crude price exceeds $80 per barrel.

Rino E. Abad, director of the DoE Oil Industry Management Bureau, said the 30-day trading yielded an average Dubai crude price of $99.41 per barrel as of Sept. 11.

The removal of the tax can result in a reduction of P3.36 per kilo for liquefied petroleum gas (LPG) and P5.60 for every liter of kerosene.

Arnel U. Ty, founder of LPG Marketers Association, Inc., said he has sent a letter to the Department of Energy and DoF to recommend the removal of excise tax on LPG, kerosene, diesel, and gasoline.

“It has not just exceeded $80 for four weeks but has now been above $80 per barrel for six weeks,” Mr. Ty said in a Facebook post in Filipino. — with Reuters