The persistently high fuel prices in the Philippines are closely tied to the Oil Deregulation Law.
‘Fuel prices in the Philippines are high because the government has chosen to surrender price-setting to private oil firms,’ research group IBON Foundation Executive Director Sonny Africa said.
The implications of the disruptions in the Strait of Hormuz are immediate for the Philippines as one of the most energy-sensitive economies in Asia. The Philippines sources over 96 percent of its crude oil imports from the Middle East, making it highly vulnerable to global price swings.
The Strait of Hormuz, located between Oman and Iran, connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. It is the primary route for oil from Saudi Arabia, UAE, Kuwait, Iraq, and Qatar and provides the only sea passage from the Persian Gulf to the open ocean.
The Strait of Hormuz is the world’s most important oil chokepoint because large volumes of oil flow through the strait, estimated in 2025 to be around 15 million barrels (2.4 million cubic meters) of oil per day. Chokepoints are narrow channels along widely used global sea routes that are critical to global energy security. The inability of oil to transit a major chokepoint, even temporarily, can create substantial supply delays and raise shipping costs, increasing world energy prices.
On March 2, 2026, the Strait of Hormuz was closed with warnings from the Iranian armed forces that any ship that entered the strait will be set on fire.
As of April 2026, shipping is severely disrupted by the US-Iran war, with daily traffic falling to about seven ships compared to over 130 previously, raising fears of massive oil price spikes. IBON noted that countries in the region with stronger state participation and vertically integrated oil industries are better able to stabilize domestic prices and protect consumers.
In contrast, the Philippines, along with Singapore, has minimal state intervention, with government response limited to adjusting taxes while leaving pump prices to so-called market forces.
IBON noted that the fuel prices in the Philippines are now among the highest in ASEAN and a major driver of higher inflation. ‘Oil isn’t a simple commodity but an input used widely across the economy, yet the Oil Deregulation Law allows oil companies to price freely according to whatever maximizes their profits. This is made worse by high fuel taxes which just further amplify imported price shocks,’ Africa added.
Due to Republic Act 8479 entitled ‘Downstream Oil Industry Deregulation Act of 1998′ approved on February 10, 1998, the Philippine government effectively reduced its control on oil-related pricing activity and trade restrictions.
Prior to RA 8479, the Energy Regulatory Board took into account the dollar cost of imported crude oil and the foreign exchange rate, and fixed prices of petroleum products.
A budgetary allocation maintained by the national government called the Oil Price Stabilization Fund (OPSF) automatically absorbed any price change incurred by the oil companies in importing crude oil, which is not reflected in the selling price.
Deregulation generally means the lifting of government control and letting market forces work in the business.
There are four major reasons why the oil industry was deregulated: to stabilize and provide reasonable prices; to encourage competition; to encourage investments; and to remove cross product subsidies.
For the local oil downstream industry, the concept of deregulation covers: a) price decontrol; and b) removal of restrictions on the establishment and operation of facilities as well as the importation and exportation of crude oil and petroleum products.
Higher oil prices feed directly into inflation, local currency and interest rate expectations, which manifest in the increasing transport, utilities and food prices.
IBON pointed out that oil firms’ use of ‘replacement cost’ pricing has enabled substantial windfall profits, estimated at around P46.5 billion in March alone, or roughly P1.5 billion daily.
These gains come at the expense of the 21.1 million poorest, low-income, and lower middle-class Filipino families already struggling with rising costs of living even before the oil shocks.
IBON warned that rising fuel costs will further drive inflation, with March inflation already accelerating to 4.1 percent, and hitting the poorest households even harder.
IBON called on the Marcos administration to take decisive action, including asserting public control of the oil industry, removing fuel taxes, and establishing stronger state mechanisms to manage oil supply and pricing in the public interest.