Oil Prices Going Up

Another conflict in the Middle East is inflicting another round of price increases in the world oil market.

- BOO CHANCO

Media reports, including one from ABS-CBN's energy reporter Alvin Elchico, are warning us that tomorrow's oil price adjustment may see the price of gasoline rise to between P3.30-P3.50 a liter. Diesel may go up to between P5.00-P5.20 a liter. Kerosene may go up to between P4.50-P4.70 a liter.

If that happens, that's a horrible big-time increase that will impact heavily on our transport sector.

Gasoline and diesel account for about 90 percent of all energy consumption in transport. Electric vehicles or EVs are getting popular but nowhere near being able to significantly replace petroleum for transport. Ethanol and coconut oil are more expensive than gasoline and diesel and not as efficient.

Too bad the electricity-powered commuter train projects are delayed. That would have lessened the blow of oil price increases on commuters.

Expensive oil is bad enough. But what if the supply dries out? Our economy would be at a standstill.

Iran has warned that they will block the Strait of Hormuz should the United States join the war Israel is waging.

Roughly 20 million barrels of oil—about 1/5 of all sea-traded oil—flows daily through Hormuz. The strait is narrow (only about 40 kilometers wide) and lies close to Iran's coast—perfect for asymmetric warfare: small boats, anti-ship missiles, naval mines, drones and swarming tactics.

The mere threat of blocking the strait is enough to raise oil prices. So far, prices have gone up by 10 percent, reflecting a surge in the geopolitical risk premium tied to the strait's strategic importance.