Gov’t prepares fuel subsidies amid ME crisis

President Ferdinand R. Marcos, Jr. said fuel subsidies should be allocated to those who are most vulnerable to an imminent spike in oil prices due to the escalating Middle East conflict.

“We are starting already with the assumption that oil prices will in fact go up, and I cannot see how [they] will not because the Strait of Hormuz will then be blocked if it escalates,” the President said during an inspection of a burned-down elementary school in Quezon City.

Government earlier distributed fuel subsidies during the coronavirus pandemic. The President said we might do it again if tensions between Middle Eastern powers trigger a sharp rise in oil prices.

“We will have to do the same for those who are severely affected —stakeholders — by any instability in the price of oil. Yes, it’s a serious problem,” he added.

The Department of Energy (DoE) earlier said the government is ready to roll out fuel subsidies to transport operators and farmers to contain the broader impact of high fuel costs on the prices of basic goods and services.

Oil firms in the Philippines are mandated to maintain a minimum 30-day fuel inventory to help stabilize local supply. Should global crude prices breach the $80 per barrel threshold, fuel subsidies for public transport drivers and fisherfolk will be automatically triggered.

The short-term government interventions could diffuse the impact of high oil prices on consumers as well as control inflation.

Aside from elevated oil prices, the weaker peso may also cause an uptick in inflation.

Year to date, the peso is still up by 1.51% from its end-2024 close of P57.845.

Meanwhile, government should accelerate the adoption of electric vehicles (EV), fast-track renewable energy development and reduce reliance on imported oil amid the Middle East conflict, analysts said.

Some analysts said, “Periodic crises in the Middle East should compel government to expedite the transition to electric or hybrid vehicles in order to protect the public from the acute but severe impact of regional tensions.”

The crisis should prompt the power sector to build generation facilities that are not dependent on imported fossil fuels sources.

Another analyst added, “The RE (renewable energy) sector should be fully supported with more incentives, more investments and more government support.”

Recent events highlight the Philippines’ vulnerability to oil price shocks and should serve as a wake-up call to accelerate energy diversification.

“While fuel subsidies offer short-term relief, we have to strive for long-term resilience, such as investments in renewables, LNG (liquefied natural gas) infrastructure, and energy efficiency, while modernizing transport and power systems to reduce dependence on imported oil,” he said.