Petron Corp., the oil company of San Miguel Corp., is grappling with a crude supply deficit despite emergency imports from Russia, highlighting the fragility of the Philippines’ fuel security amid escalating geopolitical tensions in the Middle East.
Petron, which controls about 30 percent of the domestic fuel market and operates the country’s only oil refinery, said it had secured 2.48 million barrels of Russian crude to stabilize inventories following the government’s declaration of a national energy emergency under Executive Order No. 110. The volumes are expected to support operations only until June, falling short of replacing disrupted supply and leaving a residual gap.
The deficit stems from the cancellation of two Middle Eastern shipments totaling 4 million barrels after the closure of the Strait of Hormuz and heightened risks in the Red Sea. For a country that sources about 98 percent of its crude from the region, the disruption underscores a critical vulnerability.
While Russian crude—particularly ESPO (East Siberia-Pacific Ocean) grades—offers a viable alternative feedstock, it comes with pricing implications. ESPO typically trades at a premium to Dubai crude, driven by strong demand from Asian refiners, especially China, and its relatively high quality and shorter shipping routes. At times, this premium has reached as much as USD7 per barrel, though it can fluctuate with market conditions and logistics constraints.
For Petron, this raises the likelihood of higher input costs that could eventually feed into domestic pump prices, especially if reliance on premium-grade substitutes persists. Even as the imports help avert an immediate supply crunch, they may come at the expense of thinner refining margins or higher retail prices.
The company said the Russian purchases were undertaken only as an extraordinary measure after exhausting other options, in coordination with the Department of Energy and Department of Finance. The Bangko Sentral ng Pilipinas has also clarified there are no legal barriers to financing such transactions.
The episode underscores a deeper structural issue of replacing Middle Eastern crude is not just a logistical challenge, but a cost one, suggesting that prolonged disruptions could keep fuel prices elevated while testing the resilience of the country’s energy supply chain.
