Editorial Analysis: What are the Implications?
Venting President Marcos Jr's Worry Over Oil Crisis in Middle East
President Ferdinand "Bongbong" Marcos Jr voiced his concern on Wednesday, June 25, 2025, about the ongoing conflict between Iran and Israel, stating it could have unforeseen effects on the global economy, despite the administration's claim that the impact will be "manageable." However, Marcos' worry extends beyond the Middle East's direct impact on the Philippines, as he anticipates indirect consequences, considering the region's distant yet critical position.
Leading the worry is the increase in oil prices and the potential domino effect on all industries that rely on this critical commodity. Marcos' team, along with the Department of Energy (DOE) officials, have pledged that "minimal and unnecessary" consequences will occur due to their vigilant monitoring of the situation and interventions to tackle "price gouging."
However, consumers' protection against exploitative businesses is essential in this sensitive situation.
What the Fuss is About: The Strait of Hormuz
The Strait of Hormuz plays a crucial role in worldwide oil logistics, with approximately one-third of the world's seaborne oil flowing through it, including large volumes of oil and liquefied natural gas (LNG) exports from Gulf regions. Any disruptions, such as a closure or blockade, would significantly impact these supplies, as alternative routes and pipeline capacities are limited and incapable of offsetting the loss.
Oil Supply and Prices in the Philippines
As an energy-importing country, the Philippines relies heavily on oil imports, much of which passes through the Strait of Hormuz from Middle Eastern suppliers. Any crisis that restricts oil flow through the strait could lead to immediate supply shortages or delays, forcing the Philippines to resort to costlier and lengthier shipping routes or tap into strategic reserves.
Economic Implications for the Philippines
A blockade or significant disruption would cause a surge in global oil prices, with experts predicting prices to rise above $100 per barrel, a rise of around $25 compared to current prices. As a result, the Philippines would face increased domestic fuel prices, leading to inflationary pressure and economic instability due to higher transportation and production costs across industries.
Broader Economic Challenges
Compounded by these economic pressures, higher oil prices could strain both government and consumer budgets, potentially pushing up the cost of goods and services, and increasing inflation. The impact on overall economic stability could be significant, potentially necessitating emergency economic measures or fuel rationing.
Mitigating Factors
Unlike the US and UK, which have domestic energy production as a buffer against Middle Eastern supply shocks, the Philippines lacks these buffers, making it more vulnerable to strait disruptions. The extent and speed of economic impact would depend on the crisis's duration and the effectiveness of alternative supply arrangements.
In the context of President Marcos Jr's concerns, the potential economic implications are significant as a surge in oil prices due to disruptions in the Strait of Hormuz could adversely affect finance and energy-dependent industries within the business sector. With oil being crucial for the Philippines, as an energy-importing country, any crisis that restricts oil flow could lead to inflationary pressure and economic instability, straining both government and consumer budgets.
