Shell refinery shutdown to increase inflation – Fitch

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Increasing oil imports resulting from Shell’s decision to close its Batangas refinery would make the Philippines vulnerable to global oil price swings and jacking up of inflation, global market research company Fitch solutions warned.

With domestic fuel demand expected to grow in the coming years, Fitch said the country will have little choice, but to raise import volumes, barring an unlikely significant spike in refining output.

Trends from past years indicate the inability to offset rising fuel import needs with its own production, likely resulting in further added import costs down the line, it added.

Data from the Department of Energy in 2019 showed that 65.5% of the country’s oil demand was met through imports of finished petroleum products. The rest came from imports that went through Shell and Petron’s respective refineries.

With Petron left as sole refiner, Fitch said that the country’s oil imports will inevitably rise since 32% of fuel production capacity had been lost. This would then increase the annual cost of oil shipments between $600,000 and $900,000 compared when Shell was producing. Petron has recently threatened to close its Bataan refinery over taxation issues.

The Bangko Sentral ng Pilipinas, however, doesn’t share Fitch’s view, at least for now, saying that inflation may only range between two and four percent between now and 2022.

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