Elevated fuel prices seen remaining after US pauses hostilities in Iran

By Sheldeen Joy Talavera, Reporter

THE two-week truce initiated by the US in its conflict with Iran could help ease global oil prices, but the impact is unlikely to be felt at the Philippine pump-price level anytime soon, as market volatility is expected to persist, analysts said.

“The de-escalation of the tensions arising from the ceasefire in the Middle East will  result in a significant unwinding of the war premium that was incorporated into prices and has built up due to the conflict,” Leo P. Bellas, president of Jetti Petroleum, Inc., told BusinessWorld.

Mr. Bellas said the potential de-escalation can lead to a sharp decline at the crude oil and refined fuel levels, but added that prices “will likely remain elevated because the supply situation has not changed.”

He said that next week, pump prices could take a break from their run of increases, and might instead stay level or even fall following the decline in the Mean of Platts Singapore, a benchmark for Singapore-refined petroleum products.

“But markets may bounce back in day or two after digesting the extent of the current damage to infrastructure and lead time to restore production and exports, and after an assessment of the strength or fragility of this declared ceasefire,” Mr. Bellas said.

In a social media post on Tuesday, US President Donald J. Trump said he has agreed to suspend attacks against Iran for two weeks after talks with Pakistan Prime Minister Shehbaz Sharif and Field Marshal Asim Munir, who help mediate the ceasefire.

This superseded Mr. Trump’s deadline for Tehran to reopen the Strait of Hormuz, a strategic waterway and critical chokepoint that handles a significant share of global crude shipments.

“Hopefully the market will quickly react positively to lower the price,” Jose M. Layug, a former Energy undersecretary and executive board member of the Philippine Energy Research & Policy Institute, told BusinessWorld.

“WTI (West Texas Intermediate) and Brent benchmarks are now below $100/bbl after the announcement. I am hoping Dubai crude oil will also go down from its current level,” he added.

Bri-gitte Car-mel C. Lim, senior vice-pres-id-ent and chief oper-at-ing officer of Top Line Busi-ness Devel-op-ment Corp., a Cebu-based fuel distributor, said that while the ceasefire can help ease global oil prices, it could be temporary and volatility will likely remain.

Ms. Lim said global price movements will likely be reflected at the pumps after one to two weeks.

“Prices will still depend on how the situation develops in the coming weeks,” she told BusinessWorld.

In a briefing on Tuesday, Energy Secretary Sharon S. Garin said she does not expect oil prices to go down anytime soon even if the Strait of Hormuz is reopened as the war already has done extensive damage to energy infrastructure in the Middle East.

“The speed of the increase in pump prices will not be the same as the drop in prices. In fact, it will be way, way slower because the damage caused goes beyond the war,” she said.

For this week, oil companies have implemented another set of fuel price increases at the pumps, ranging from P15-P19.80 per liter for diesel and P1.50-P5.90 per liter for gasoline.

Since the US and Israel attacked Iran on Feb. 28, the increases in diesel prices have totaled P100.05 per liter, while gasoline and kerosene surged by around P52.30 and P82.40 per liter, respectively.

“This is by far the fastest and the highest increase of our oil prices and that’s due to the war in the Middle East,” Ms. Garin said.