Philippines declares national energy emergency as Iran war fuels oil shock fears

MANILA – Philippine President Ferdinand Marcos Jr has declared a national energy emergency, warning that escalating tensions in the Middle East could disrupt global oil supply and drive up fuel and electricity costs in the country.

On March 24, Mr Marcos signed an executive order that the ongoing conflict involving the United States, Israel and Iran – which is “creating uncertainty in global energy markets, disrupting supply chains and exerting upward pressure on oil prices” – is posing a threat to the country’s energy security.

The move signals that Manila is bracing itself not just for a temporary spike in oil prices, but also a potentially prolonged external shock that could feed into inflation. This could strain transport and power costs, and test the government’s ability to cushion consumers in a highly import-dependent economy.

The Philippines imports nearly all of its fuel needs, making it particularly vulnerable to disruptions in key shipping routes such as the Strait of Hormuz.

The last time that the Philippines declared a nationwide emergency was during the Covid-19 pandemic in 2020. But the latest declaration marks a rare instance – and the first in recent years – that such powers have been invoked with energy security as the primary focus.

The order, signed by Mr Marcos, sets in motion a coordinated government response to stabilise fuel supply and limit the knock-on effects on transport, food and electricity.

Measures include fuel subsidies for key sectors like public transport drivers, tighter monitoring to prevent hoarding and profiteering, and faster approvals for energy projects.

The executive order also allows the government to streamline procurement processes and mobilise resources more quickly, while coordinating with the private sector to secure supply and maintain stable electricity generation.

The Philippines still has about 45 days of fuel supply, Energy Secretary Sharon Garin said in a separate press briefing on March 24.

But she said the government is setting aside roughly 20 billion pesos (S$427 million) to build a diesel buffer, amid uncertainties linked to the Middle East crisis.

The government is targeting to collect two million barrels, equivalent to about 10 days’ additional supply, with an initial million barrels now being procured from within and outside South-east Asia.

Ms Garin said the reserve, intended as a precautionary buffer, will prioritise the transport sector, as the government moves to diversify fuel sources.

The pressure is already being felt on the ground.

Across the archipelago, thousands of jeepney drivers parked their vehicles and joined transport strikes on March 13 and 19, with two more being organised for March 26 and 27.

They said that rising diesel prices are eating into already thin daily earnings, leaving some struggling to break even after long hours on the road.

Early signs of strain have also emerged in the aviation sector. Local budget carrier Cebu Pacific has suspended several international flights until October, citing operational adjustments as fuel costs rise and conditions in the region remain uncertain.

Mr Marcos, in remarks to Bloomberg on March 24, said more drastic steps – including the possibility of grounding flights altogether – could not be ruled out if the situation worsens.

The authorities have said assistance will be extended to vulnerable sectors, including transport workers, farmers and fisherfolk, as well as migrant Filipino workers affected by the conflict in the Middle East.

The emergency measures will remain in effect for up to one year unless lifted earlier.

Mr Jonathan Ravelas, who now runs his own advisory firm after previously serving as chief market strategist at BDO Unibank, told The Straits Times that Mr Marcos’ executive order is a precautionary measure, not a sign of panic.

He said it signals that the government is moving early to manage risks from a potentially prolonged oil shock rather than a short-term spike.

But he warned that if oil prices remain elevated, inflationary pressures could persist, complicating prospects for rate cuts. He said the Philippine peso may come under pressure from higher dollar demand and growth could soften as rising costs weigh on consumers and businesses.

“Bottom line: This is about preparedness – and the practical message for Filipinos and businesses is to brace for higher costs, manage cash carefully, and not assume oil risks fade quickly,” Mr Ravelas said.

Assistant Professor J.C. Punongbayan from the University of the Philippines Diliman School of Economics offered a more critical view, saying the executive order, while sensible, appears “reactive and late”, coming only weeks after the Middle East conflict had already pushed up oil prices.

He said the order relies largely on coordination and existing administrative measures rather than decisive policy action, with no clear stance on fuel taxes, subsidies or the fiscal trade-offs involved.

“As a result, it feels more like a mere summary of the ongoing responses rather than a timely, strategic and forward-looking intervention,” Prof Punongbayan told ST.

“This deepens doubts about the Marcos government’s ability to abate the economic impact of the oil price crisis in the coming weeks and months.”