THE Philippines has been characterized as the most vulnerable economy in Southeast Asia to the oil shocks triggered by the United States-Israel war on Iran. That assessment, from Maybank Investment Bank, is based on the country’s extreme dependency on imported oil, 95 percent of which comes from the Persian Gulf. This makes our economy exceptionally sensitive to supply-chain disruptions and price spikes compared to our Southeast Asian neighbors.
Due to these factors, Maybank slashed its projected gross domestic product growth for the Philippines from 4.9 percent to 4.5 percent this year. It also raised its 2026 inflation forecast from 2.8 percent to 3.3 percent, estimating that for every 10-percent sustained rise in crude oil prices, inflation here increases by about 0.45 percentage point, the highest in the region.
A worsening current account deficit as a result of rising energy costs will further weaken the local currency.
Moreover, the country’s 45-day fuel buffer for gasoline, diesel and fuel is limited compared to those of our neighbors, such as Malaysia (70 days or more) and Thailand (60 to 65 days), putting the local economy at risk in the event of a long-drawn supply shock.
Realizing these dangers, President Ferdinand Marcos Jr. has announced a P20-billion fund to procure more fuel, and declared a state of national energy emergency that allows the Department of Energy (DOE) to bypass certain procurement laws to speed up fuel imports and make advance payments exceeding the usual 15-percent limit to secure shipments.
The president has also signed Republic Act (RA) 12316, which grants him the power to suspend or reduce excise taxes on petroleum products when world oil prices hit a specific threshold.
The government has also provided a number of transport subsidies for public utility vehicle drivers and operators, and expanded free or discounted public transport rides to cushion the impact of rising fuel prices on commuters.
Early on, the Marcos administration also implemented a four-day workweek and banned unnecessary travel as a way of reducing fuel consumption in government agencies.
Arguably, these palliative measures are necessary to maintain calm in what is clearly a destabilizing environment. But longer-term measures, some of which were detailed at The Manila Times’ energy forum on March 26, will make us less vulnerable to future oil shocks once this crisis passes.
For one, we stand to benefit from an expansion of the Green Energy Auction Program, a flagship initiative by the DOE designed to speed up the country’s transition to renewable energy (RE). The program uses a competitive bidding process to pull in private investment, aiming to hit the national target of a 35-percent RE share in the power mix by 2030 and 50 percent by 2040. Already, the government has successfully auctioned 12 gigawatts of RE capacity to be delivered between 2025 and 2035.
With solar and wind prices dropping significantly, successful auctions could lower electricity rates by up to 32 percent in some regions by 2029, Maybank said, reducing the need for imported coal and gas.
Another long-term solution is nuclear energy. The passage of RA 12305, or the Philippine National Nuclear Energy Safety Act, in September 2025 provides a regulatory framework for nuclear power and establishes an independent nuclear regulator.
For the first time in decades, there is a concrete regulatory road map for nuclear power. With the signing of RA 12305, the country established the Philippine Atomic Energy Regulatory Authority, or PhilAtom. The government expects to start accepting license applications for small modular reactors in late 2026, aiming for the first operational plant by 2032. This would provide the “baseload” power that solar and wind cannot, without the volatility of imported oil.
We also need to speed up the electrification of public transport. Regardless of the political noise generated by increasingly nonsensical transport strikes, it is high time to phase out old and dirty diesel-burning jeepneys and shift to electric vehicles, or EVs. The insanely high prices prevailing for diesel these days can only provide added impetus for this shift.
Finally, an aggressive search for natural gas to replace the aging Malampaya field can ensure that the country doesn’t become 100-percent dependent on expensive liquefied natural gas imports. Particularly encouraging were two major natural gas finds in early 2026, both located near the existing Malampaya field off the coast of Palawan province.
Of course, reducing dependence is also about using less. Grids can be made smarter by using artificial intelligence to manage intermittent sources such as solar power more efficiently, reducing the need to turn to oil-based plants in times of high demand.
The recent shift to a four-day workweek for government offices can be institutionalized, and the private sector can be encouraged to follow suit to permanently lower national fuel consumption.
