Calm before a storm?

International oil prices have surprisingly hovered in the low-to-mid $90s instead of skyrocketing despite the continued closure of Hormuz. That makes it easy to start being complacent.

A strong decline in global demand is responsible for that apparent stability in the face of a still severe physical supply disruption.

Traders have been generally hopeful, reacting sharply with every hint from Trump that a peace deal with Iran is at hand. It also helped that China has drastically reduced its import demand.

Rather than compete for expensive crude oil during the blockage, Chinese refiners slashed their imports by six million barrels per day in May and chose to aggressively draw down their own commercial onshore inventories.

Other countries also authorized massive emergency reserve releases. Members of the International Energy Agency (IEA) unanimously made 400 million barrels of emergency reserves available to the market. This immediate injection of supply prevented panic-buying and hoarding. Non-OPEC+ countries like the United States increased production and export.

Many governments also mandated some amount of fuel rationing which destroyed demand. This also helped in stabilizing the market.

Analysts say the global economy is currently in “an artificial window of stability.” But if Hormuz remains closed and inventories hit critical lows by July, the underlying physical reality of a 14-million barrel per day deficit will shock the market.

The crisis will continue to be harshest on countries like ours that are almost totally dependent on petroleum transiting Hormuz. We also do not have a strategic petroleum reserve, making the impact immediate.

It is not surprising that Philippine petroleum prices experienced extreme volatility. There were sharp increases in April, a major government-mandated price rollback in early June and another substantial upward adjustment for diesel and kerosene.

On June 2, 2026, the Department of Energy (DOE) enacted a massive price rollback that pushed pump prices closer to pre-Middle East conflict levels. Just a week later, on June 9, prices shifted upward again.

DOE must have thought that global prices had started to stabilize when it ordered that massive price rollback on June 2. The benchmark prices eased with rumors of an extended ceasefire and the potential reopening of the Strait of Hormuz to commercial shipping.

But the sharp increases implemented on June 9 were a direct reaction to renewed conflict. Global benchmarks surged by over three percent, which trickled down to Asian trading markets by Monday morning.

Then, there is the weakening peso. Our poor and battered peso hit historic lows of P61.75 against the US dollar. That ate up a good part of any decline in global oil prices.

Oil traders think oil prices can likely hold around the $100/bbl level for another three to four weeks, with the absolute breaking point arriving by late June or July 2026.

With global oil inventories draining at a record-breaking pace, IEA warns we are rapidly approaching a critical structural cliff.

While it is good that our government is now thinking of establishing a strategic petroleum reserve as part of lessons learned from this crisis, the beneficial effects will only be felt in a similar future crisis.

DOE will have to do a better job of planning for our immediate energy security that will include the use of diplomacy to secure alternative sources of energy.

Our government must assist our private sector secure long-term supply agreements. Most urgent is reassuring our coal supply from Indonesia through the ASEAN channel.

We have Southeast Asia’s most coal-dependent power grid. We import roughly 70 percent of our coal supply, and nearly 97 percent of those imports come from Indonesia.

Indonesian President Prabowo Subianto issued a directive late last month that ends direct international sales of coal by private companies and routes them exclusively through PT Danantara Sumberdaya Indonesia, a unit of Indonesia’s sovereign wealth fund.

While assurances of supply stability were given by Jakarta to Manila, it is best to formalize a government-to-government agreement before the new rule takes effect next year.

The deployment of solar energy systems appears to be the most promising locally available energy resource.

At the local level including households, solar power installations can provide a level of energy independence. Solar systems with batteries deployed in a microgrid can help communities reduce electricity costs and dependence on the grid.

Indeed, many are now taking the initiative of going solar. A recent article at The New York Times featured Mike de Guzman, president of Solaric, a rooftop-solar installer based near Manila.

The NYT article said Solaric was installing roughly twice as many systems each month as it had been before the war — and not coming close to keeping up with demand. “Solar is no longer seen as a cool gadget or a toy, but as a way to survive this new age,” De Guzman was quoted as saying.

De Guzman gets his solar equipment from China. The value of solar equipment that China exported to the Philippines hit a record of almost $300 million in March — more than double the previous monthly record, The NYT reports.

Doesn’t this make us too dependent on China instead? True but unlike oil and natural gas, which require a consistent supply, solar panels tend to last for decades, mitigating the risk of dependency.

Our transport sector is most dependent on petroleum. That’s reason enough to shift to electric vehicles. Again, there is no escaping dependence on China.

China exported a record $9.1 billion worth of electric and plug-in hybrid vehicles in April, up more than 50 percent year-over-year. Our car manufacturing program must consider electric vehicles in its plans.

So far, the world has survived the worst energy crisis ever. But this may just be the calm before the storm. We must not be taken by surprise again.

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco