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Oil companies may stagger the expected increase in pump prices, which shot up by more than P2 per liter in the first two trading days this week after drone attacks on two Saudi refineries cut output by the world’s top exporter by half.
READ: ‘Oil spike to cut PH deeply’
Energy Secretary Alfonso Cusi, for his part, said he has formed a team to study the possibility of additional importation through the Philippine National Oil Company to ensure the country’s strategic oil reserve.
“For the first day alone, it was already P2 for gasoline and P1.50 per liter for diesel,” an industry source said, adding that domestic prices were certain to climb further.
“The coordinated strikes disrupted about half of Saudis oil capacity,” said Jesus Suntay, president of the Independent Philippine Petroleum Companies Association. While oil companies would try to cushion the impact by a staggered implementation, oil price increases are inevitable,” he added.
The Department of Labor and Employment, meanwhile, said it is prepared to repatriate more than 50,000 Filipino workers in Saudi Arabia should the condition worsen there.
Labor Secretary Silvestre Bello III said his department is still assessing the possible implications of the recent attacks on the safety and security of Filipinos working in Saudi Arabia.
Socioeconomic Planning Secretary Ernesto Pernia said the attacks and the resulting rise in oil prices would definitely hurt the economy.
“There is also the possibility of [a] faster inflation rate in the coming months as well as higher transportation fares [if Saudi production facilities cannot quickly recover],” Pernia said.
READ: Saudi oil well goes offline for a month, 3-million bpd foregone
But Pernia played down the possibility that remittances from Filipinos working abroad, which hit a record $28.9 billion last year, would also suffer.
“I don’t think remittances will be impacted… Unless many of the Filipino workers there are employed in the affected facilities,” Pernia said.
An oil industry source, however, said there may be no way to mitigate the impact of the Saudi Arabia attacks. The Philippines imports about 12.2 percent of its crude requirements from Saudi Arabia although the bulk of its supply comes from the Middle East countries.
“There is actually no way to mitigate this. The entire world is affected. We can only hope that this does not escalate even further to a full-blown war,” the source said.
He also said proposals to suspend the implementation of the excise tax on oil can only be done legally if Dubai crude prices reach $80 per barrel.
The consumer group Laban Konsyumer Inc. said the government should see to it that the oil companies comply with the minimum inventory requirement of 30 days for crude oil and 15 days for finished products and seven days for liquefied petroleum gas (LPG).
“These inventory [levels] should cushion the country against supply distortion that may impact on the ability of the country to replenish import volume,” LKI president Victorio Dimagiba said.
The Energy department is set to meet with oil industry officials this week to look into the sufficiency of inventory levels in the aftermath of the drone attacks against Saudi Arabia.
Pernia said one of the most pressing issues surrounding the attack on Saudi Aramco facilities is how quickly the refineries can resume production.
His remarks echoed an ING Bank report Tuesday that said unless Saudi production was quickly restored, the disruption “looks set to add to recessionary fears.”
READ: Drone hits spark fires at Aramco oil depots
ING said Saudi oil inventories are probably less than 26 days’ worth of Saudi oil exports and extra supply from the Organization of Petroleum Exporting Countries—perhaps 800,000 to 900,000 barrels—on’t be anywhere near sufficient to compensate for the over 5 million barrels per day lost.
“A prolonged outage would therefore likely see Brent crude trading well over $70 and perhaps closer to $80 if the outage extended over three to four weeks,” ING said.
ING further said that countries like Japan, Korea and India—big buyers of Saudi oil—are likely to be most affected and they have high energy dependency ratios.
“Again it would seem that Asia is most affected by this supply disruption, effectively compounding the challenges posed by the US-China trade war and the semi-conductor cycle,” ING said.
Last week, before the attacks, the central bank said the inflation rate was expected to continue its downward trajectory in the months ahead and settle well within the target range of 2 to 4 percent until 2021.
The attacks on the Saudi refineries and the resulting supply tightness are likely to change those projections.
Bello reported that no Filipinos were hurt in the weekend drone attacks on the Saudi refineries.
The labor chief also said DOLE is in close coordination with the Department of Foreign Affairs on the possible repatriation in case the situation worsen and pose a danger to 50,000 Filipinos working in Saudi Arabia.
Saudi Arabia, the world’s largest oil exporter, is among the top destination countries for Filipinos working overseas, composing 24.3 percent of the total 2.3 million worldwide, the Philippine Statistics Authority reported in 2018.
