‘Are we really prepared for another massive economic disruption like the COVID-19 pandemic…’
JUST as we thought that our worries over the Russia-Ukraine war are ebbing, the Israel-Iran conflict erupted to ruin our dream of stable oil prices.
Global oil prices inched up by 4 percent more as the war between the two countries rages, with local oil firms imposing an almost P2 per liter price hike this week.
If Iran moves to close Strait of Hormuz, a major supply artery will be choked since the strait is the main exit route for 25 percent of the world’s oil and gas supply coming from Saudi Arabia, the UAE, Kuwait, Qatar and Iraq.
Israel and Iran have been historical triggers of world oil crisis. In 1973, oil prices spiraled after Israel went to war against Egypt and Syria while Iran had its share during the 1979-1980 Iran civil war. Israel also triggered an oil price shock when it waged a war against Palestinians in 1999 to 2000.
With the US threatening to join the current Israel-Iran fray, a far-reaching global oil crisis becomes imminent. This will translate directly to higher pump prices, increased transportation costs, and inflationary pressures that would burden ordinary Filipinos.
Our nation is heavily dependent on imported oil that we consume an average of 471,403 barrels per day (bpd) – still sober compared to Thailand’s addiction of 1.2 million bpd.
Beyond oil worries, the safety and welfare of our overseas Filipino workers (OFWs) in the region remain a paramount concern. We have at least 2.2 to 3 million Filipinos working in the Middle East and North Africa.
Our government must adopt a proactive approach to cushion the impact.
For now, a full-scale evacuation of OFWs in the affected areas has been ruled out but assistance will come to those who want to come home. When this happens, government must have a robust and readily executable contingency plans, which include transport logistics, alternative evacuation routes and standby funds for repatriation.
President Ferdinand Marcos Jr. has already offered immediate relief to motorists through fuel subsidies, targeting PUV drivers. He has also ordered the energy department to coordinate with oil companies to ensure stable inventory to help manage price adjustments.
At present, oil companies are required to maintain a 30-day fuel inventory, and if the price of crude oil exceeds $80 per barrel, fuel assistance for public transport and fisherfolk will kick in.
Brent crude futures are trading this week at almost $77 a barrel, up from $74.84.
Are we really prepared for another massive economic disruption like the COVID-19 pandemic that has sunk the country into a quagmire of multi-trillion debts?
The long-term solution lies in reducing our reliance on imported oil and diversifying the sourcing of other critical imports like fertilizers to temper supply disruptions.
About 66 percent of the country’s nitrogen-based fertilizer is imported. Qatar, Iran’s closest neighbor, is one of the top sources.
Ramping up renewable energy like wind, solar and hydro, promoting energy efficiency initiatives, and shifting to electrification of public transport should also be prioritized.
Solar energy is gaining ground but it would achieve more traction if cheaper technology makes it possible for each household to install one.
The government must continue engaging all parties involved in the war, advocating for a peaceful resolution and ensuring normalization of global trade.
The Israel-Iran conflict reminds us once again how connected we are to the world despite distance.
While the country cannot control geopolitical conflicts, it can certainly control its preparedness and response to weather another global oil upheaval.
