THE Bangko Sentral ng Pilipinas (BSP) expressed concern that with the country’s energy sector’s dependence on imported refined oil, the Philippines is more vulnerable to refining margins in China, South Korea and Singapore than rising crude prices.
Based on the 2022 Financial Stability Report, the BSP said 79.8 percent of the country’s energy requirements is composed of refined oil and the balance of 20.2 percent is made up of crude oil.
The central bank noted that China, South Korea and Singapore collectively provided 60.3 percent of the country’s refined oil imports. The Philippines only had one refinery and would not be enough to serve the needs of the country.
“We can see the relevance of refining margins by looking at Mean of Platts Singapore (MOPS) prices, which has increased more than the benchmark WTI (West Texas Intermediate) prices,” the BSP said.
Based on the FSR, China accounts for 30 percent of the country’s refined oil imports followed by Singapore at 17.3 percent; South Korea, 13 percent; Malaysia, 11.4 percent; and Other countries, 28.3 percent.
Implications on prices
THE BSP said this set-up will also have implications on prices especially with the Russia-Ukraine conflict. The central bank is concerned with Russia’s sale of crude oil to China.
“China’s economic situation is thus not simply a question of how the world responds to the second largest economy. For us, this has a bearing on our ability to source refined petroleum from China,” said the central bank.
The BSP added that 94 percent of the monetary investments in the industry are driven by 1.5 percent of the total market players. This means, only 337 players invested out of 21,786.
The report stated that those who made monetary investments were market players who import, operate terminals and distribute oil in bulk.
“The volatility in the oil market is not only an inconvenience for consumers at the gasoline station. Instead, it has major effects on production and logistics. Oil, gasoline and diesel not only drive cars, but also drive economies,” the BSP said.
A recent Bloomberg report stated that oil prices could see a 6 percent increase on the back of China’s recovery and cooling inflation in the United States.
The report stated that China increased its crude oil purchase “after Beijing issued new import quota and consumption is poised to surge to a record this year following the nation’s exit from Covid Zero” (full story: https://businessmirror.com.ph/2023/01/13/oil-set-for-weekly-gain-on-china-optimism-brighter-us-outlook/).