Philippines Fuel Prices Rise Again, Led by Diesel and Kerosene Hikes

MANILA, Philippines – Pump prices are going up again starting Tuesday, July 7, as oil firms implement another round of fuel price increases following renewed pressure on diesel and kerosene prices. In a press conference on Monday, July 6, Energy Secretary Sharon Garin announced the following permitted price range adjustments for the week of July 7 to 13: Gasoline – from a decrease of P1.75 per liter to an increase of up to 25 centavos per liter Diesel – increase of P1.57 to P3.57 per liter Kerosene – increase of P1.70 to P3.70 per liter The latest movement follows last week’s fuel price increase, when pump prices went up by P1.60 to P1.90 per liter for gasoline, P0.80 to P0.85 per liter for diesel, and P1.20 to P1.22 per liter for kerosene. The DOE’s price monitoring showed common retail prices in Metro Manila at P70.00 per liter for gasoline RON95, P69.00 per liter for gasoline RON91, P69.90 per liter for diesel, and P98.50 per liter for kerosene for the week of June 30 to July 6. The current fuel inventory is projected to last about 43.72 days for gasoline, 43.81 days for diesel, 177.50 days for kerosene, 84.93 days for jet fuel, 36.45 days for fuel oil, and 42.28 days for LPG, based on DOE data as of July 3. Dubai crude back to pre-war levels; why haven’t pump prices followed? The price hike may appear counterintuitive because Dubai crude, a benchmark watched by the DOE, has already fallen back to levels seen before the Middle East conflict. But DOE Undersecretary Alessandro Sales explained that local pump prices do not immediately move in step with Dubai crude because the Philippines imports much of its fuel as finished petroleum products, such as gasoline and diesel. “Yes, meron tayong good news. Ang average ng Dubai ay bumaba na po. It’s now below our $80 per barrel marker,” Sales said. “In fact, last week, ang average [ay] mga $65 per barrel.” (Yes, we have good news. The average price of Dubai crude has already gone down. It’s now below our $80 per barrel marker. In fact, last week, the average was around $65 per barrel.) Most fuel companies operating in the Philippines import much of their fuel, including diesel, as finished petroleum products. Only Petron Corporation imports crude oil and refines it locally. Because of this, pump prices are more directly influenced by the Mean of Platts Singapore (MOPS) which tracks the regional traded prices of finished fuels such as diesel and gasoline. So even if Dubai crude has returned to pre-war levels, diesel prices at the pump may remain elevated for as long as MOPS diesel stays above its pre-war price. “Ang presyuhan is a MOPS index. May MOPS index for gasoline, may MOPS for diesel,” he said. “Ang ibig sabihin ng MOPS is ito ang tinitingnan nila, ‘yung actual na pinagbentahan para sa araw na ‘yun ng diesel sa lugar natin.” (Pricing is based on a MOPS index. There is a MOPS index for gasoline and a MOPS index for diesel. MOPS looks at the actual traded price for diesel in the region for that day.) This is why crude prices can ease while diesel pump prices remain elevated. According to Sales, MOPS diesel was at $92.37 per barrel in the week before February 28, when fighting involving Iran and US-Israeli forces began. But last Friday, MOPS diesel closed at $114.73 per barrel. “So kahit na ‘yung Dubai crude ay naging pantay na ng pre-war, ‘yung diesel mismo may premium pa rin, mas mataas pa rin ang benta ng diesel ng $22 per barrel kaysa noong bago nagsimula ang gera. Kaya nagre-reflect ito sa pump price natin,” Sales said. (So even if Dubai crude is already at pre-war levels, diesel itself still carries a premium. Diesel is still being sold $22 per barrel higher than before the war began. That is why this is reflected in our pump prices.) Sales said that due to the lag between the movement of crude oil prices and the eventual price of finished fuel products sold to motorists, fuel prices may begin to normalize within one to two months – assuming there are no further disruptions. “Ang expectation natin, kapag wala nang mangyayaring matinding gulo ulit, within one, two months, ‘yung lag time na ‘yan, makahabol na, magno-normalize na rin ‘yung presyo ng produkto,” he said. (Our expectation is that, if there are no major disruptions again, within one to two months, that lag time will catch up and product prices will also normalize.) Supply conditions in the Middle East have also shown signs of improvement after weeks of volatility tied to the conflict involving Iran and US-Israeli forces. (READ: US, Iran indirect talks conclude in Doha, focused on Strait of Hormuz) The Strait of Hormuz, the narrow waterway between Iran and Oman, remains a key risk to global fuel markets. It is one of the world’s most important oil shipping routes, and any disruption to tanker traffic can quickly affect global crude and refined product prices. Local pump prices remain above levels seen before fighting involving Iran and US-Israeli forces erupted on February 28. In the last full week before the conflict, DOE data showed common retail prices in Metro Manila at P56 per liter for gasoline RON95, P54.70 per liter for gasoline RON91, P55 per liter for diesel, and P83.47 per liter for kerosene. The Philippines is a net importer of petroleum products, making local pump prices vulnerable to global oil price swings, foreign exchange movements, regional refined fuel prices, and disruptions in international supply routes. – Rappler.com