Sheldeen Joy Talavera is a journalist.
Analysts predict that ENERGY COMPANIES may face difficulties with oil input expenses due to the ongoing conflict in the Middle East. They also believe that this situation could potentially offer opportunities for exploration companies.
In a Viber message, Luis A. Limlingan, the sales head of Regina Capital Development Corp., noted that domestic energy and oil companies may encounter obstacles as a result of rising expenses, potentially impacting their profits.
He stated that businesses in the oil industry may see a positive impact from increased prices, which would help balance out the expenses of their activities.
According to Reuters, oil prices increased by 4% on Monday due to the recent military confrontations between Israel and Hamas, a Palestinian Islamist organization. This has sparked concerns about potential disruptions in oil supply from the Middle East.
The price of Brent crude increased by $3.57 or 4.2%, reaching $88.15 per barrel. Similarly, US West Texas Intermediate crude saw a rise of $3.59 or 4.3%, reaching $86.38 per barrel. Both benchmarks saw a significant increase of over $4 or 5%.
According to Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., despite geopolitical uncertainties that could cause an increase in global oil and fuel prices, it is still wise for the Philippines, a country that imports more oil than it exports, to conserve energy.
According to Mr. Ricafort, the involvement of other major oil-producing Middle Eastern countries, such as Iran, in the conflict is still unknown and has not yet happened.
According to data from the Department of Energy (DoE), the Philippines imported 6,892 million liters of crude oil in 2022, a 46% increase from the previous year’s 4,721 million liters. All of this oil was sourced from the Middle East.
According to Rodela I. Romero, Assistant Director of the DoE Oil Industry Management Bureau, fluctuations in the market may cause an increase in oil prices, but this may not have a lasting effect.
According to a Viber message, the attack caused a sudden increase in oil prices on Sunday. However, experts believe that there will not be a lasting effect on oil and gas prices unless the conflict continues to intensify.
According to Ms. Romero, the Philippines typically obtains oil from neighboring countries rather than from Israel.
In a televised briefing in Filipino, she stated that the United States and Saudi Arabia are the largest producers of oil. Therefore, if the situation worsens, it could have a significant impact on us as market fears and uncertainties can lead to higher prices.
According to Carlos Angelo O. Temporal, a senior analyst at Unicapital Securities, Inc., the effect on the worldwide oil supply should be small as long as the dispute only involves the two groups.
On Tuesday, local oil companies reduced the pump prices of petroleum products.
The companies released separate statements stating a reduction of P2.45 per liter for diesel, P3.05 per liter for gasoline, and P3 per liter for kerosene.
For the third week in a row, there have been reductions in the prices of gasoline and kerosene, putting an end to 11 weeks of continuous price hikes.
Ms. Romero stated that the Department of Energy will keep a close watch on the changes in the global oil market. Any changes in the local pump price will only be a reflection of the current situation in the international oil market.
Experts suggest that domestic oil producers may see advantages if global oil prices rise, but this could pose difficulties for other sectors that heavily rely on oil, such as transportation and manufacturing, resulting in higher operational costs.
According to Mr. Temporal, the logistics industry, specifically airline companies, would suffer from increased oil prices as jet fuel makes up a significant portion of their costs. This would also affect the consumer sector as higher prices for goods and services may limit their spending power and increase input costs may decrease profit margins.
Investors are predicted to remain cautious in order to assess potential geopolitical threats that could impact investments in energy companies. It is recommended that they closely track any changes.
According to Mr. Ricafort, investors are currently seeking out safe havens as a precaution against potential geopolitical risks. This trend of investing in secure options will continue until the situation stabilizes, as a way to ensure safety.
Mr. Limlingan advised investors to keep a close watch on events in the Middle East and how they may affect oil prices. An increase in oil prices could offer attractive investment prospects for energy companies, particularly those engaged in exploring and producing oil.