AS the Middle East conflict causes disruptions in global oil supply, governments across Asia are preparing measures to cushion their economies from another energy shock.
And with global oil costs on the rise, who bears the brunt of the energy shocks?
Economists say the answer may lie closer to home, warning that Filipino households — particularly those in the low- and middle-income brackets — could feel the biggest strain as higher fuel costs ripple through transport fares, food prices, and other everyday expenses.
Heavily reliance on import oil
According to MUFG Research, Asian economies rely heavily on imported oil, much coming from the Middle East. About 95 percent of the Philippines’ crude oil imports originate from the region, while around 65 percent of Asia’s oil imports come from the same area.
“While the Philippines only imports 3 percent of its refined product needs directly from the Middle East, shortages from regional refineries and the global spillovers of higher product prices will no doubt impact the Philippines,” MUFG said.
Japan was said to have the largest buffer, with reserves enough to cover about 254 days of domestic demand, followed by South Korea with 210 days. India maintains around 74 days of supply, while the Philippines has nearly two months of reserves, mostly in refined petroleum products.
Union Bank of the Philippines chief economist Ruben Carlo Asuncion said the country is more exposed than its regional peers due to limited strategic oil reserves and the lack of long-term price control mechanisms.
“Unlike some neighboring countries that either produce oil domestically or cushion price movements through broad fuel subsidies, the Philippines relies largely on market based pricing,” Asuncion said.
“This means global supply shocks — especially those linked to key chokepoints such as the Strait of Hormuz — tend to be transmitted more quickly and more fully into domestic fuel prices,” he added.
Asuncion said higher global oil prices can quickly feed into Philippine inflation, often within weeks, adding that since local fuel prices are regularly adjusted based on global benchmarks, transport costs usually rise first as pump prices go up.
“These higher transport costs then spill over into food prices through logistics, distribution, and farm inputs such as fuel intensive irrigation and fertilizer,” Asuncion said.
Asuncion said the first impact is usually seen in transport inflation, but higher oil prices can later push up the cost of food and other basic goods, especially if prices stay elevated for months.
Estimates from the Department of Planning, Economy and Development showed that under a scenario where oil prices average about $100 per barrel in March and remain above $80 until May, inflation could rise to between 4.5-5.1 percent this month and between 4.5-4.8 percent in April.
For the full year, inflation could fall between 4.0-4.2 percent before easing to around 3.5-3.6 percent in 2027.
A more severe scenario assumes oil prices reaching about $140 per barrel in March and staying above $80 until September. Under this, inflation could jump to between 6.3-7.5 percent in March and remain elevated at around 6.4-7.5 percent in April.
For 2026, inflation could average between 4.5 and 4.8 percent, and then moderate to around 3.6-3.7 percent in 2027.
Low- and middle-income seen hitting the hardest
Reyes Tacandong & Co. senior adviser Jonathan Ravelas said low- and middle-income households are likely to be hit the hardest.
He noted that commuters, transport workers, farmers, and small businesses tend to feel the impact first, as fuel and food make up a larger share of their monthly spending.
“Fuel prices adjust within weeks, transport fares follow soon after, and food prices typically rise within 1-2 months as logistics and farm-to-market costs increase,” Ravelas said.
The government has already laid out plans to mitigate the said crisis, which includes implementing a four-day work week and easing of excise tax on fuel. However, Ravelas said it “can immediately soften pump prices and inflation, but it’s a temporary cushion, not a structural fix, and it comes at a fiscal cost.”
“It may help some workers save on commuting, but overall fuel demand won’t fall meaningfully unless paired with remote work and transport reforms,” Ravelas argued.
Estimates showed that under a scenario where Dubai crude futures reach around $100 per barrel in March, diesel prices could climb to 74.22 percent in March and 67.33 percent in April.
If the government suspends the excise tax from March to May 2026, the increase would ease slightly to 67.50 percent and 60.61 percent, respectively.
However, the policy would significantly cut government revenues. A three-month suspension could result in total revenue losses of about P43.3 billion, including foregone excise taxes and related value-added tax (VAT) collections.
If extended to seven months, the revenue loss could widen to about P105.9 billion, reflecting nearly P97.7 billion in lost excise tax collections and P12 billion in foregone VAT, partially offset by higher VAT from rising prices.
Philippine Tax Academy President Gil Beltran said the relief would be “more effective and less harmful to the fiscal position if it focuses support to low-income groups or those who use public transport.”
“In the past, we provided subsidies to buses, trains and the like. Better to do this than risk the credit standing of the whole country,” Beltran said.
“Note that the higher inflation and weaker exchange rate raises additional revenues — P40 billion for every 1.0 percent inflation rise,” he added.
Asuncion, meanwhile, said the latest developments serve as a “clear reminder of the Philippines’ vulnerability to external energy shocks and underscore the need to strengthen energy security.”
“For an economy that is heavily dependent on imported fuel, energy security is not just an energy issue but a macroeconomic and social one,” Asuncion said.
“Recent events highlight the importance of reducing exposure to volatile global markets and building a more resilient, diversified energy system over time,” he added.
