Oil prices may drop if Israel-Iran ceasefire holds

“Following announcement by US President Trump that Israel and Iran have agreed to a ceasefire, prices fell sharply in early Asian trading,” Jetti Petroleum, Inc. President Leo P. Bellas said in a Viber message on Tuesday.

“Should this trend continue, we could see prices making an abrupt U-turn to easing down,” he added.

Based on the one-day trading of the Mean of Platts Singapore (MOPS), a benchmark used for refined oil products, diesel price is projected to go up by P0.75 to P0.95 per liter; and gasoline by P1.45 to P1.65 per liter, Mr. Bellas said.

Mr. Bellas said a decrease in MOPS “will help bring down this week’s average and could equate to a lower increase for next week, or potentially to a rollback in pump prices if the low MOPS prices are maintained throughout this week.”

During a Palace briefing, Department of Energy Officer-in-Charge Sharon S. Garin said the government is in talks with oil firms to potentially hold off the second installment of the price hikes this week, given the recent drop in global crude prices after a ceasefire between Iran and Israel was announced.

On Tuesday, several local oil companies implemented a hike in gasoline prices by P1.75 per liter, diesel by P2.60 per liter, and kerosene by P2.40 per liter.

Oil firms will implement a second round of price hikes either Thursday or Friday.

Reuters quoted US President Donald J. Trump as saying that a ceasefire was accepted by Iran and Israel and was in effect, after Iran’s strikes on US bases in Qatar on Monday ramped up fears of an escalation in the conflict.

However, some caution remained after Israel ordered new strikes on Tehran in response to alleged attacks, violating the ceasefire, which were denied by Iran.

Noel M. Baga, co-convenor of think tank Center for Energy Research and Policy, said that the Philippines must prioritize energy security by establishing a strategic petroleum reserve and diversifying oil imports beyond the Middle East.

“The Middle East conflict shows that real solutions come from reducing import dependence, not managing prices. The Philippines must build a resilient energy system that protects against future geopolitical shocks,” he said in a Viber message.

However, Mr. Bellas said that “the best source” of crude oil for the country’s sole refinery is still in the Middle East.

“Importation from other sources can be an option if Middle East crude becomes inaccessible. But the cost to bring the crude oil from those other sources will definitely be higher vis-a-vis Middle East. The quality of crude oil varies depending on the source and can also be a factor if such can be used as feedstock by the refinery in the Philippines,” he said.

For refined fuel products, the country mostly sources from refineries within the Asian region, he said.

Analysts said that accelerating the country’s transition to renewable energy and expanding public transportation would be a better long-term solution.

“In the longer term, the government must hasten the country’s transition to indigenous renewable energy and prioritize the development of mass transportation. Without this, Filipinos will remain forever vulnerable to global political tensions and market disruptions,” said Gerry C. Arances, executive director for Center for Energy, Ecology, and Development.

Mr. Arances said that the government should revisit the Downstream Oil Industry Deregulation Act of 1998.

“As an immediate action, the government needs to exercise its power to cushion consumers from impacts of soaring fuel prices. We need to revisit the Oil Deregulation Law, which removed government controls on petroleum products,” he said.

However, Mr. Baga said that rather than revising the law, the government should focus on structural reforms such as boosting domestic biofuel production, improving fuel efficiency standards, and investing in local energy sources.

“Emergency price controls may provide temporary relief but often create supply shortages,” he said. — with inputs from Chloe Mari A. Hufana and Reuters