Peso weakness, Red Sea tensions drive up costs — retailers
Fuel prices are set for another round of increases this Tuesday, with diesel prices projected to rise by as much as P1.20 per liter and gasoline by P0.50 per liter, retailers said.
This impending adjustment, primarily stemming from the full five days of crude trading last week, underscores the persistent external pressures impacting the domestic energy market.
A key factor driving these increases is the continued depreciation of the Philippine peso against the US dollar, Leo Bellas, president of Jetti Petroleum Inc., said.
While the Mean of Platts Singapore (MOPS) averages, a crucial benchmark for refined products in Southeast Asia, showed only minimal movement for diesel and even a slight negative for gasoline week-on-week, the weakened peso effectively inflates the cost of dollar-denominated imports like crude oil.
This highlights the vulnerability of a net oil-importing economy like the Philippines to foreign exchange fluctuations.
Compounding the currency effect are elevated freight and premium costs for shipments transiting the Red Sea.
Bellas specifically cited “lingering tensions in the Middle East, particularly the Red Sea attacks on ships,” as the reason for these sustained surcharges.“
“The geopolitical instability in this vital shipping artery necessitates longer, more costly routes around the Cape of Good Hope, directly translating to higher logistical expenses for oil companies that are subsequently passed on to consumers,” Bellas added.
Interestingly, Jetti Petroleum noted that the price increase could have been even more substantial were it not for a slight weakening in global diesel prices last week.
This suggests that without the peso’s depreciation and the Red Sea crisis, domestic pump prices might have seen a more moderated increase or even a slight decrease for gasoline.
These forthcoming hikes follow a series of recent adjustments. Most local oil companies previously raised gasoline prices by P0.70 per liter, diesel by P1.40, and kerosene by P0.80.
Caltex, notably, employs a twice-weekly adjustment mechanism, having already implemented increases totaling P0.55 for gasoline, P1.05 for diesel, and P0.70 for kerosene last week, split into two tranches.
Data from the Department of Energy (DOE) as of July 15 showed a year-to-date net increase of P9 per liter for gasoline, P11.35 per liter for diesel, and P1.85 per liter for kerosene.
For the period July 15 to 21, average prices in the National Capital Region stood at P53.10 for RON 91 gasoline, P54.60 for diesel, and P72.80 for kerosene, further emphasizing the rising cost burden on motorists and the transport sector.
The confluence of a depreciating domestic currency and persistent geopolitical risks in critical global shipping lanes continues to exert upward pressure on fuel prices in the Philippines, underscoring the complex interplay of international market dynamics and local economic conditions.
