ASEAN Beat | Economy | Southeast Asia

Philippines Approves Shift to Dirtier Fuels as Oil Supply Crisis Bites

The country has experienced some of the sharpest increases in the price of petrol and diesel since the beginning of the Iran war.

A Petron petrol station in Puerto Galera, Philippines, May 21, 2021.

The Philippines has announced that it will permit the use of dirtier petroleum products in a bid to conserve domestic petrol supplies amid the continuing global supply crisis prompted by the war in the Middle East.

On Saturday, the Philippine Department of Energy (DOE) announced that it would temporarily permit the limited use of Euro-II petroleum products in order to help conserve supply.

The DOE said that these dirtier fuels – the Philippines adopted the lower emission Euro-IV standard in 2016 – would be limited to in-use vehicle models from 2015 and earlier, traditional jeepneys, industrial applications such as power plants and generators, and the marine and shipping industry. Euro-II standard fuels have 10 times the sulfur content of Euro-IV fuels.

“We are adopting a prudent and temporary measure to help ensure an adequate and accessible fuel supply for sectors that may require limited flexibility during this period,” Energy Secretary Sharon Garin said in a statement. “This interim authority is subject to strict quality controls, clear notification requirements, and appropriate consumer protection measures.”

The announcement came as diesel breached the triple-digit mark for the first time ever earlier this week, and the DOE warned that prices could rise as high as 114 pesos ($1.90) per liter. As the South China Morning Post (SCMP) reported, “The price surge forced some petrol stations to improvise after the figures exceeded the two-digit capacity of their digital display systems.”

The Philippines has experienced some of the sharpest rises in fuel prices in the region since the start of the Iran war on February 28. As Carlo Asuncion, chief economist at the Union Bank of the Philippines, told the SCMP, this is due in part to the country’s limited domestic refining capacity, which “means local prices quickly reflect movements in global crude and refined product markets.” It is also partly a result of the 1998 Oil Deregulation Law, which removed the government’s power to set fuel price caps, exposing Philippine consumers to the full force of global price shifts. Last week, Senate President Vicente Sotto III filed a measure seeking the total repeal of the law, saying that it was “high time to give back to the state the authority to manage fuel prices.”

The Philippine DOE’s announcement came shortly after Vietnam announced that it would switch to fully ethanol-blended gasoline earlier than planned, according to a government directive obtained by Reuters and published on Friday.

The obstruction of the Strait of Hormuz has “caused significant fluctuations in energy prices, creating numerous challenges for countries dependent on energy imports and increasing risks to ​the energy ​security of ⁠many nations, including Vietnam,” the document stated. It also ordered authorities to introduce ​incentives for the production and use ​of ⁠electric vehicles and calls for the expanded development and use of renewable energy to help offset what are likely to be intensifying shortages in the weeks and months to come.

In Vietnam, petrol prices have risen by around 50 percent and diesel prices by about 70 percent since the start of the Iran war.

The moves by Manila and Hanoi are just the latest shifts that Southeast Asian governments are making in response to the crisis in the Middle East. The Thai government has already announced that it is increasing the ratio of biofuels blends to 10 percent, while Indonesia is advancing a previously suspended biodiesel program that blends 50 percent palm-oil-based biodiesel with 50 percent conventional diesel.

Some nations are also shifting their power generation back toward more emissions-heavy coal-powered plants, due to shortages of liquefied natural gas (LNG) from the Gulf. In Thailand, the state-owned Electricity Generating Authority of Thailand has announced that it is boosting generation from the Mae Moh Power Station in Lampang province, the country’s largest coal-fired plant. The Philippines and Vietnam have also made similar shifts to coal power. Prior to the outbreak of the war, coal was slowly being phased out across the region in place of renewable energy sources and “cleaner” fossil fuels like natural gas.

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The Philippines has announced that it will permit the use of dirtier petroleum products in a bid to conserve domestic petrol supplies amid the continuing global supply crisis prompted by the war in the Middle East.

On Saturday, the Philippine Department of Energy (DOE) announced that it would temporarily permit the limited use of Euro-II petroleum products in order to help conserve supply.

The DOE said that these dirtier fuels – the Philippines adopted the lower emission Euro-IV standard in 2016 – would be limited to in-use vehicle models from 2015 and earlier, traditional jeepneys, industrial applications such as power plants and generators, and the marine and shipping industry. Euro-II standard fuels have 10 times the sulfur content of Euro-IV fuels.

“We are adopting a prudent and temporary measure to help ensure an adequate and accessible fuel supply for sectors that may require limited flexibility during this period,” Energy Secretary Sharon Garin said in a statement. “This interim authority is subject to strict quality controls, clear notification requirements, and appropriate consumer protection measures.”

The announcement came as diesel breached the triple-digit mark for the first time ever earlier this week, and the DOE warned that prices could rise as high as 114 pesos ($1.90) per liter. As the South China Morning Post (SCMP) reported, “The price surge forced some petrol stations to improvise after the figures exceeded the two-digit capacity of their digital display systems.”

The Philippines has experienced some of the sharpest rises in fuel prices in the region since the start of the Iran war on February 28. As Carlo Asuncion, chief economist at the Union Bank of the Philippines, told the SCMP, this is due in part to the country’s limited domestic refining capacity, which “means local prices quickly reflect movements in global crude and refined product markets.” It is also partly a result of the 1998 Oil Deregulation Law, which removed the government’s power to set fuel price caps, exposing Philippine consumers to the full force of global price shifts. Last week, Senate President Vicente Sotto III filed a measure seeking the total repeal of the law, saying that it was “high time to give back to the state the authority to manage fuel prices.”

The Philippine DOE’s announcement came shortly after Vietnam announced that it would switch to fully ethanol-blended gasoline earlier than planned, according to a government directive obtained by Reuters and published on Friday.

The obstruction of the Strait of Hormuz has “caused significant fluctuations in energy prices, creating numerous challenges for countries dependent on energy imports and increasing risks to ​the energy ​security of ⁠many nations, including Vietnam,” the document stated. It also ordered authorities to introduce ​incentives for the production and use ​of ⁠electric vehicles and calls for the expanded development and use of renewable energy to help offset what are likely to be intensifying shortages in the weeks and months to come.

In Vietnam, petrol prices have risen by around 50 percent and diesel prices by about 70 percent since the start of the Iran war.

The moves by Manila and Hanoi are just the latest shifts that Southeast Asian governments are making in response to the crisis in the Middle East. The Thai government has already announced that it is increasing the ratio of biofuels blends to 10 percent, while Indonesia is advancing a previously suspended biodiesel program that blends 50 percent palm-oil-based biodiesel with 50 percent conventional diesel.

Some nations are also shifting their power generation back toward more emissions-heavy coal-powered plants, due to shortages of liquefied natural gas (LNG) from the Gulf. In Thailand, the state-owned Electricity Generating Authority of Thailand has announced that it is boosting generation from the Mae Moh Power Station in Lampang province, the country’s largest coal-fired plant. The Philippines and Vietnam have also made similar shifts to coal power. Prior to the outbreak of the war, coal was slowly being phased out across the region in place of renewable energy sources and “cleaner” fossil fuels like natural gas.

Sebastian Strangio is Southeast Asia editor at The Diplomat. 

Philippines energy policy

U.S.-Israel war on Iran

Vietnam energy sector

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