EXPLAINED: How Russia-Ukraine conflict can affect local oil prices

Philippine Oil Import Bill drops 12% in 2016

While the Philippines does not directly import crude oil from Russia and Ukraine, local pump prices can be affected  by the ongoing conflict between the two countries. 

In a report by BusinessMirror, Department of Energy-Oil Industry Management Bureau (DOE-OIMB) Director Rino Abad said that 42% of the five million barrels per day of crude oil Russia exports is shipped to the Asia-Pacific region, while the rest are brought to Europe. 

While the Philippines imports its finished products from China, South Korea, and Japan, Abad said these countries are the ones importing crude oil from Russia. 

In a report by BusinessWorld, meanwhile, Energy Usec. Felix William Fuentebella said that the prices will indeed rise amid the ongoing conflict between the two countries, but ensures that there is enough supply in the country.

Based on DOE-OIMB data, the petroleum products inventory is estimated at 2.44 billion liters, including in-transit volumes. The supply of diesel is equivalent to 36 days, gasoline at 44.2 days, kerosene at 81.7 days, jet A1 fuel at 42.5 days, fuel oil at 55.2 days, and liquefied petroleum gas at 23.8 days. 

Fuentebella said that the government has no control over international oil prices – which hit the $100 per barrel mark yesterday in the wake of Russia’s invasion of Ukraine. Finance Sec. Carlos Dominguez III had said that the government is concerned about global oil prices hitting $100 a drum, but is “ready.” Dominguez had also rejected calls for the suspension of the fuel excise tax.

However, other factors in the world oil market could contribute to the continuing increase in local pump prices. 

Abad said that there is an ongoing daily production shortage of around one million barrels per day in countries that are members of the Organization of the Petroleum Exporting Countries Plus (OPEC+). As a result, the OPEC+ countries refuse to supplement oil supply amid pressures from the United States, Japan, India, and other International Energy Agency member-countries. 

Considering that supply is already coming from the existing stored inventory, and that there is insufficient daily production, and the ongoing conflict in Russia, Abad said that the oil price is arealy “experiencing premiums.” 

Locally, oil pump prices have increased for the past eight weeks. Since the beginning of the year, fuel prices have increased by Php8.75 per liter for gasoline, Php10.85/liter for diesel, and Php9.55/liter per for kerosene.