Fuel Prices Could Surge Again if Red Sea Shipping Disruptions Persist, DOE Official Warns

Fuel prices in the Philippines are expected to rise sharply if disruptions to shipping in the Red Sea continue amid escalating tensions between Yemen’s Houthi movement and Saudi Arabia, according to Rino Abad, director of the Department of Energy’s Oil Industry Management Bureau (DOE-OIMB).

Abad said Friday that while there has been no reported damage yet to Saudi Arabia’s Petroline or the East-West oil pipeline, any such damage could severely impact the shipment of approximately 6 to 7 million barrels of crude oil. This would likely trigger a significant increase in local fuel prices.

Currently, pump prices have stabilized in the range of 80 to 90 Philippine pesos per liter, but Abad cautioned that this stability is fragile. He noted in an interview with Super Radyo dzBB that the persistent concerns about oil supply disruptions are no longer limited to the Strait of Hormuz but have now extended to the Red Sea. This new front of tension is causing market jitters and could push prices higher if the situation worsens.

Abad emphasized that as long as Saudi Arabia’s Petroline remains undamaged, prices are expected to stay within the current range. However, he warned that any damage to the pipeline could push prices beyond the 80 to 90 peso range, potentially leading to even steeper increases.

The rising tensions stem from the Houthis’ strategy to disrupt shipping in the Bab el-Mandeb strait, a critical maritime chokepoint connecting the Red Sea to the Gulf of Aden. Yemeni Foreign Minister-designate Afrah Al-Zouba indicated that the Houthis aim to replicate Iran’s strategy in the Strait of Hormuz by targeting shipping routes in the Red Sea. This has escalated the conflict into a new front in the broader Iran-Saudi Arabia proxy war.

The Houthis have intensified their attacks by firing missiles and drones at Saudi Arabia and declaring a blockade on Saudi shipping. In response, Saudi Arabia has launched airstrikes against what it describes as Houthi military facilities. This tit-for-tat escalation threatens to disrupt one of the world’s key oil transit routes.

Abad described this development as a potential “game changer” for global oil markets and local fuel prices. He explained that damage to the Petroline could affect the export of 6 to 7 million barrels of Saudi oil, which would have a direct impact on supply and prices.

He further noted that if actual damage occurs, fuel price adjustments could reach between 10 to 12 pesos per liter. Given that prices have already surpassed this range, any further disruptions could push prices even higher.

Despite these concerns, the DOE reported on Tuesday that the country’s fuel stock remains steady and is expected to last for nearly 45 days, providing some buffer against immediate supply shocks.

The situation remains fluid, with the potential for further escalation in the Red Sea region posing a significant risk to oil supply chains and fuel prices in the Philippines. Authorities and market watchers will be closely monitoring developments in the coming weeks.