If Hormuz remains closed, we got three weeks to ‘empty’
THERE is an alarming fact about the Philippine economy that rarely enters public debate: If global oil imports suddenly stopped, the country would likely begin running out of fuel in three to four weeks. That fact has now moved from theoretical vulnerability to urgent reality.
China — which has the second-biggest oil reserves in the world with 1 billion barrels — could have supplied us with some oil, but it’s likely they won’t, thanks to the Ferdinand Marcos Jr. regime’s belligerent stance against the superpower, with defense officials even declaring it as the biggest threat to the country.
As part of its retaliation for the brutal joint US-Israeli strikes on its territory, Iran has effectively closed the Strait of Hormuz, the narrow maritime corridor through which roughly one-fifth of the world’s oil normally flows, allowing only tankers from countries that are not helping the US-Israeli aggression.
Shipping companies have halted transits, with many of their tankers now anchored just outside the Strait. Insurance coverage for vessels entering the Gulf has evaporated. President Trump had earlier boasted that US warships will escort oil tankers through the strait. That has proven to be an empty threat: Trump’s warships dare not, as they’d likely go down with the tankers.
For most countries the closing of Hormuz is a severe shock. For the Philippines, it is a countdown. The reason is simple: The country has almost no strategic petroleum reserves.
Unlike major industrial economies, the Philippines does not maintain a large government stockpile of oil designed to cushion the nation during geopolitical crises. Instead, it relies on a much thinner buffer — mandatory inventories held by private oil companies under the Downstream Oil Industry Deregulation Act of 1998 and monitored by the Department of Energy.
Under these rules, refiners are required to keep about 30 days of crude or petroleum products, importers around 15 days, and retailers roughly seven days. On paper the numbers look reassuring. In reality they are not. The DOE claims the private sector has 45 days of reserves. No one believes this, especially as the Secretary of the Energy Department Sharon Garin, was appointed to the post only as political accommodation to the powerful Garin clan of Iloilo, with her work experience having been a party-list representative since 2010. She really knows little about the oil industry private sector operators.
Inventories
Industry insiders say the private sector’s reserves are less than a week, as many of them cannot afford to maintain inventories, and the energy department doesn’t do physical check-ups of their inventories. Only Petron, sources say, has complied with the law and has even kept 40 days’ inventory of crude oil and 30 days of finished products. But Petron accounts for only 30 percent of the market share. The other 70 percent only import finished products with an average 10 days inventory.
Whatever inventories the oil companies have are scattered across companies and across products — diesel, gasoline, jet fuel, LPG. They do not form a unified national reserve that government can deploy during a crisis. When analysts add the stocks together and adjust for actual consumption patterns, the effective national buffer comes to roughly 20 to 30 days.
Three to four weeks. That is the Philippine margin of safety. It is equivalent to your car having less than one-fourth of its tank capacity, but you have to travel from Manila to Baguio.
The Philippines produces no crude oil domestically. The offshore Malampaya field supplies natural gas used in power generation, but it produces virtually no petroleum fuels. Nearly everything that moves the Philippine economy — gasoline, diesel, aviation fuel — comes from abroad. As a result, the country imports around 90 to 95 percent of its petroleum supply.
Much of that oil comes from the Middle East, particularly from producers such as Saudi Arabia and the United Arab Emirates. Even refined fuels arriving from regional hubs such as Singapore or South Korea often began their journey as crude pumped from Persian Gulf fields.
That crude normally exits the Gulf through one narrow maritime bottleneck: the Strait of Hormuz. Although half of the strait is within Iran’s territorial waters, and half Oman’s, international law says that ships of all countries have the right to pass through without having to get Iran’s or Oman’s permission. But to hell with international law: The US and Israel’s attack on Iran violated not just all principles of international law but of human decency.
Iran has warned that any ship passing through it without its permission would be “set on fire.” Iranian forces have so far attacked 20 tankers, bulk carriers, and container ships trying to sail through the strait.
Iran does not need even long-range weapons to attack ships in the Strait of Hormuz, as its mainland is just 30 kilometers away. Even relatively short-range anti-ship missiles and drones — such as the Noor, Qader and Shahed-136 — can reach vessels passing through the narrow waterway from launch points on Iran’s coast or nearby islands.
Reserves
For countries that maintain large strategic reserves, the closure is a manageable disruption. Governments can release oil from storage while markets scramble to find alternative supply routes. Some 51 countries have such reserves. The United States maintains its Strategic Petroleum Reserve, capable of holding hundreds of millions of barrels of crude oil. Japan maintains reserves covering roughly 200 days of petroleum consumption. Over the past two decades China has quietly built massive strategic storage facilities of its own.
These countries prepared precisely for moments like this. Three of our neighbors — Singapore, Thailand, and the oil-producing Indonesia — have at least a month of reserves. We have practically zero reserves: The impact of a sustained disruption would unfold quickly.
During the first week or two, fuel would still be available in the market but prices would surge. Oil traders would immediately price in the loss of Persian Gulf supply, pushing pump prices sharply upward. Airlines would begin trimming flight schedules, shipping companies would slow operations, and logistics costs would ripple across the economy. Panic buying would likely accelerate the drawdown of stocks. Motorists and fleet operators would rush to fill tanks, compressing weeks of supply into days.
By the third week the situation would begin deteriorating more visibly. Some fuel stations would run dry. Transport companies would struggle to secure diesel deliveries. Food prices would begin rising as trucking costs escalate. And beyond that point the consequences could become severe.
Diesel is the lifeblood of the Philippine logistics system. It powers cargo trucks that move food from farms to cities, buses and jeepneys that transport millions of commuters, cargo vessels that carry goods between islands, and construction machinery used in infrastructure projects.
Hospitals, telecommunications networks and commercial buildings rely heavily on diesel generators as backup power. Remove diesel from the system and the machinery of the economy slows. Remove it long enough and the machinery stops.
The Philippines is especially vulnerable because it is an archipelago. Movement of goods between islands depends heavily on diesel-powered vessels. Even within large islands, food distribution relies on trucks traveling long distances from farms to urban centers.
Prices
A prolonged fuel shortage therefore does not merely raise prices. It threatens the physical movement of goods. Food may still exist in farms and warehouses, but without diesel it cannot easily reach the cities where most Filipinos live.
If Middle Eastern oil cannot reach Asia because Hormuz is closed, the Philippines’ most practical emergency supplier may lie much closer to home: China.
China today operates the largest oil refining system in the world, dominated by state-owned giants such as Sinopec, PetroChina and China National Offshore Oil Corp.
Together they run enormous refinery complexes along China’s eastern coastline. China’s refining capacity exceeds 17 million barrels per day, and in many years Chinese refineries produce more diesel and gasoline than domestic demand requires. The surplus is exported to neighboring Asian markets. From major Chinese export ports such as Ningbo or Zhoushan, tankers can reach Philippine ports in three to five days. By contrast, shipments from the Persian Gulf normally take two to three weeks.
While the Philippines lies thousands of miles from the Middle East, it sits only a short voyage from the world’s largest refining hub. In purely logistical terms, Chinese refineries could supply emergency fuel to the Philippines faster than Gulf producers.
The chickens, though, have come home to roost. President Marcos and his officials have adopted a belligerent stance against China, complying with the US strategy of demonizing China to prevent it from developing allies in the region, even going to the extent of provoking the superpower in the South China Sea disputed maritime areas. The Philippine Coast Guard’s Jay Tarriela was even promoted to admiral level for doing nothing but publicly spreading lies about China, and his cartoon of China’s President Xi Jinping as a demon — which no other country’s officials have done — had become viral in Chinese social media, provoking outrage toward the Philippines.
China won’t give the Philippines a liter of gasoline even if Marcos begs for it. With the oil crisis, I hope the likes of retired justice Antonio Carpio, Senators Vicente Sotto and Panfilo Lacson, Tarriela and the rest of the pro-American mob of little minds claiming that those like me who have advocated an objective view of our South China Sea disputes, realize that we’re not being pro-China for doing so, but only steadfastly pro-Filipino using our minds.
What an unlucky country, with a stupid presidency that is so much a US puppet.
Facebook: Rigoberto Tiglao
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If Hormuz remains closed, we got three weeks to ‘empty’
Source: Breaking News PH
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