24 Months to 2028: How the Philippine Energy Crisis Becomes a Political Crisis

The next Filipino voter walks into a polling booth on 8 May 2028. That’s roughly twenty-four months from now. Whichever candidates are on the ballot will face an electorate that has spent two years living with diesel above ₱100 a litre, LPG rationed by the month, rotational brownouts in Luzon and Visayas, and Meralco bills that keep climbing despite the May 2026 reprieve.

This is not a forecast. This is the situation today.

On 24 March 2026, President Marcos declared a national energy emergency under Executive Order 110 — the first country in the world to do so following the closure of the Strait of Hormuz. By the time you read this, the strait has been effectively shut to commercial shipping for more than seventy consecutive days. A brief reopening on 21 April collapsed within twenty-four hours. The International Energy Agency calls it the largest supply disruption in the history of the global oil market.

For most of the world this is a price problem. For the Philippines it is a sovereignty problem.

The 21-mile problem

Ninety-eight per cent of Philippine crude imports come from the Middle East. Of the refined fuel we don’t import as crude, ninety-seven per cent of liquid petroleum and ninety-one per cent of LPG comes from refineries in Singapore, Malaysia, South Korea, Japan and India — all of which themselves source from the Gulf.

That entire flow passes through a single stretch of water twenty-one nautical miles wide at its tightest point, controlled by a hostile regime that has just redefined the Strait of Hormuz as a “vast operational area” extending from Jask to Siri Island.

The energy that runs every Philippine factory, hospital, hotel, school, restaurant, jeepney and tricycle depends on tankers passing through a corridor narrower than the distance from Manila to Tagaytay.

And it was not inevitable — it was a policy choice, made over thirty years through the Downstream Oil Deregulation Law of 1998, the closure of the Caltex refinery in 2003, the closure of the Shell Tabangao refinery in 2020, and the continued reliance on imported coal for sixty-two per cent of electricity generation.

What the next twenty-four months look like

Three scenarios. None of them are good.

If the strait reopens in one month, ICIS and World Oil analysts project that physical oil market tightness persists for at least ninety days beyond reopening. Pump diesel stays in the ₱75–90 range through Q3. Meralco generation charges remain elevated. LPG availability tight but managed. The Marcos administration claims credit for “weathering the crisis.” The opposition asks why we are still here.

If the strait stays closed for three more months — which is currently the most likely scenario according to SolAbility’s Day 42 model — Brent crude moves to $154 per barrel. Pump diesel reaches ₱120–145 sustained. The peso weakens past ₱60 to the dollar. LPG rationing becomes realistic. The Asian Development Bank has already offered the Philippines up to $1.75 billion in emergency funding precisely because this scenario is now their planning assumption. Inflation jumps roughly 1.8 percentage points above baseline. GDP growth is shaved by approximately one percentage point. Every congressman in a tricycle-belt district starts hearing from his constituents.

If the strait stays closed for six months, we enter the territory SolAbility labels “Prolonged closure” — $200 per barrel scenarios become plausible. Pump diesel ₱150–200. LPG rationed. Rolling brownouts standard. Cold chain failures begin to bite. Restaurants close. Food spoilage rises. Hotels in Baguio have already reported 40–50 per cent drops in arrivals; under this scenario, the tourism sector collapses entirely. The 2026 Ammungan Festival in Nueva Vizcaya was already cut from five days to one. The IMF moves from offering support to imposing conditions.

What changed this week

Anyone who believes this is a slow-moving story should look at the last seven days alone. Four pieces of news, each from a respected international source, all pointing the same direction:

1. The Financial Times: “Brace for an oil supply crunch”

The Financial Times editorial board wrote yesterday (18 May 2026) under the headline “The world must brace for an oil supply crunch”:

The loss of about 14.4mn barrels a day of crude oil output from the Gulf countries in April due to the Strait of Hormuz closure has been partly offset by draining stockpiles and other temporary reliefs … But a crunch point is approaching. The International Energy Agency warned last week that oil inventories are being depleted at a record pace. Further scarcities in poor countries and price jumps in rich ones loom within weeks. Governments, companies and consumers need to be ready.

The FT reports that the IEA estimates the world has been consuming roughly 6mn b/d more crude than is being produced; that the coordinated 400mn-barrel strategic reserve release announced in March is approaching its limit; that JPMorgan expects OECD commercial inventories to approach “operational stress levels” by early June; and that the tightest markets are emerging not in crude but in refined products — diesel and jet fuel. Eighty countries have already put emergency measures in place. The FT’s conclusion: “more countries are going to have to learn to live within their more limited energy means.”

2. President Trump suspended a military strike on Iran — for now

Today (19 May 2026), President Trump posted on Truth Social that he had suspended a planned US military operation against Iran that was scheduled for tomorrow, at the request of the leaders of Qatar, Saudi Arabia and the United Arab Emirates. Trump said US forces have been instructed to be ready to go forward with a “full, large scale assault of Iran, on a moment’s notice” if an acceptable deal is not reached. Brent slipped 2.15% on the announcement to $109.69, but is still up roughly 50% since the late-February US–Israeli strikes. The ceasefire is fragile, the strait remains largely closed by Iran, and a deal is not the same thing as tankers moving again. From Manila’s perspective, the headline risk is not whether the strike happens; it is that the entire Philippine fuel supply position is now riding on a sequence of 48-hour diplomatic windows in Doha, Riyadh and Abu Dhabi.

3. The first drone strike on an Arab nuclear site

On Sunday (17 May), a drone struck an electrical generator near the Barakah nuclear power plant in Abu Dhabi — the Arab world’s first nuclear plant. There was a fire but no radiation release. The UAE has not formally apportioned blame, but a senior Emirati official has suggested Iran or one of its regional proxies. Barakah sits roughly 50 km from the southern Hormuz approach. The signal is that the conflict is no longer confined to shipping lanes and crude exports — civilian energy infrastructure in friendly Gulf states is now considered a legitimate target. For a Philippine policymaker, the read is that the supply chain we depend on is no longer just exposed to a chokepoint; it is exposed to escalation.

4. The US Treasury just extended the Russian oil waiver — and named us

Treasury Secretary Scott Bessent announced this week a further 30-day extension of the US sanctions waiver allowing purchases of Russian seaborne oil — despite promising last month that there would be no second extension. Bessent said the move would “ensure oil reaches the most energy-vulnerable countries” as developing nations bear the brunt of rising oil prices. Read carefully, that is the US Treasury publicly admitting two things at once: that the global supply situation is bad enough to walk back a stated policy commitment, and that countries like the Philippines are now in the bucket Washington is openly worried about. The waiver is a lifeline, but it is a 30-day-at-a-time lifeline, and the next extension is not guaranteed.

5. And the Russian backup is itself being demolished

Reuters reported yesterday (Moscow, 18 May 2026) that Ukraine has been systematically targeting Russian energy infrastructure as peace talks have stalled. Inside the last six weeks alone:

• NORSI (Lukoil) — Russia’s fourth-largest refinery and second-largest gasoline producer, ~320,000 bpd — suspended operations on 5 April following a drone strike.
• Tuapse (Black Sea export refinery, ~240,000 bpd) — halted on 16 April; a second drone strike caused a major fire on 28 April.
• Syzran (Rosneft, ~170,000 bpd) and Novokuibyshevsk (Rosneft) — both halted from 18 April after drone damage.
• Perm (~250,000 bpd) — halted on 7 May after a drone-caused fire.
• Astrakhan gas processing plant — fire on 13 May.
• Moscow refinery (Kapotnya, ~220,000 bpd) — struck on Sunday (17 May); 12 people wounded.

That is roughly one million barrels per day of Russian refining capacity offline or impaired in six weeks, much of it on the diesel and gasoline side — precisely the products the FT identifies as the tightest global markets. The world’s third-largest crude exporter is having its refining fleet taken apart drone-strike by drone-strike. Manila’s assumption that Russian crude is a meaningful diversification away from the Gulf is, in practice, an assumption that someone else will refine it for us. That assumption is now under fire — literally.

The diagnosis: a reactive state

Asia Times described this with painful accuracy in April:

The Philippines continues to absorb external shocks in largely the same way: waiting for disruption, responding with partial measures and framing the outcome as unforeseen. It is not just an energy problem; it is a problem of how policy is made — a kind of crisis choreography.

The pattern is unmistakable. The Downstream Oil Deregulation Law was passed in 1998 in good times and left the country without a functioning strategic petroleum reserve. The coal moratorium was announced in 2020 but does not cover existing or “committed” plants, so coal generation has increased since the moratorium. The Philippine Energy Plan 2023–2050 still projects rising fossil gas dependence through 2040 even after the lessons of the 2022 Ukraine LNG crisis. Now we are scrambling to buy Russian crude under a one-month US sanctions waiver, paying premiums to bring in 22,000 tonnes of LPG via PNOC, drawing ₱20 billion from the Malampaya gas fund, and asking the public to be “prudent” with fuel.

None of this is a strategy. It is improvisation under fire.

What the Philippines actually has

Let us be honest about the assets on the table.

One operating refinery, and it was built for the wrong crude. Petron’s facility in Limay, Bataan, processes 180,000 barrels per day — about thirty per cent of national demand. It was designed and configured for Middle East medium-sour crude (roughly 32° API gravity, 1.5–2 per cent sulfur). The remaining seventy per cent of refined product is imported as finished fuel from refineries in Singapore, Korea and Japan that depend on the same Gulf crude.

This sounds like a sourcing problem with an easy fix. It is not. The refinery’s product slate is determined by the crude it processes, and the alternatives now being publicly discussed each fail at the refinery gate:

• Venezuelan heavy crude (Merey, Boscán — around 16° API and 2.5–3 per cent sulfur, among the heaviest and most sour grades traded globally) physically cannot be run at Limay. Heavy crude requires a coker or upgrader to crack the heaviest molecules; Limay has no coker. Retrofitting one would take three-to-five years and well over a billion dollars of capex. Even US refiners can only process Venezuelan crude at a subset of Gulf and East Coast plants that have coking capacity.
• US WTI and US shale (Eagle Ford, Bakken, Permian — roughly 40–45° API, sub-0.5 per cent sulfur) is technically run-able at Limay, but it yields the wrong product mix. Light sweet shale crude produces a lot of naphtha and gasoline and relatively little middle distillate. The Philippines needs the opposite: diesel for trucks, jeepneys, gensets and the cold chain, plus jet fuel. Run US shale through Limay and you finish with surplus gasoline you must export at a discount and a diesel deficit you must still import.
• Russian ESPO blend sits in the middle — lighter and sweeter than the Middle East medium-sour the refinery was designed for, so the same product-slate distortion applies, just less acutely. Petron has confirmed purchasing about 2.48 million barrels of Russian crude since the war began, and is openly seeking further alternatives, after losing access to four million barrels of Middle East supply.

The conclusion is uncomfortable: even if Manila secures alternative crude supply, the country cannot refine itself out of a diesel shortage without rebuilding its only refinery. Until then, every barrel of non-Gulf crude that goes into Limay produces less of what the country actually burns. The strategic petroleum reserve question and the refinery configuration question are the same question.

LPG is the worst-positioned fuel of all — and the one that bites a Filipino household first

If diesel is the fuel the economy runs on, LPG is the fuel kitchens run on. Roughly seven in ten Filipino households cook with LPG. Hospitals sterilise on it. Hotels heat water with it. Food manufacturers bake, fry and pasteurise with it. Cold chain operators use it on standby generators. And of every fuel the Philippines depends on, LPG is the worst-positioned.

• 91 per cent of Philippine LPG is sourced from the Middle East — a higher concentration than crude. The remainder comes through Asian refineries that themselves depend on Gulf crude. There is no meaningful domestic production.
• The carrier fleet is specialised and smaller. LPG moves on pressurised or refrigerated LPG carriers, not on crude or product tankers. The global LPG fleet cannot be expanded quickly, and ships cannot be redirected from other trades.
• The buffer is thin. National LPG supply was reported at 33–36 days at peak; PNOC’s emergency 22,000 MT shipment in May represented roughly five days of national consumption. The April 13 removal of LPG and kerosene excise taxes was a price cushion, not a supply solution.
• There is no commodity-grade substitute at the point of use. A household stove, a hospital autoclave, an LPG-fired kitchen or industrial boiler cannot trivially switch to diesel. The burners, regulators, piping and permits are not interchangeable. Substitution requires capex and time the household and the hospital do not have.

The political consequence is direct. Diesel shortages show up first in transport costs, freight, and electricity tariffs — a month of pain before it lands at the household level. LPG shortages show up at lunchtime, at the cooking pot. Rice does not get cooked. The first month of LPG rationing produces a political response measured in days, not in quarters. This is why the Marcos administration moved on the excise tax in April: not because excise relief solves supply, but because the political optics of a household LPG shortage are intolerable.

For the policymaker, the implication is sharp: LPG is the fuel category most likely to produce a constituency-level political crisis between now and 2028, and it is the category least amenable to "buy from somewhere else" diplomacy. The structural answer is the same answer as for diesel: reduce the dependency at the point of use. Hospitals, hotels, food manufacturers and dairies that currently burn LPG for hot water and process heat can run on electric heat pumps using a fraction of the energy. Households on LPG can shift to induction cooking. Every kitchen and boiler that comes off LPG is a kitchen and boiler that does not appear in the next supply-shortage headline.

No strategic petroleum reserve. Petron’s commercial inventory and crude-in-transit is, in the words of former Albay congressman Joey Salceda, “the closest thing this country has to a strategic buffer.” A proper national reserve would require approximately ₱108 billion at pre-war oil prices and a soft loan structure to attract investors. It does not exist.

A coal-heavy grid that is also import-dependent. Coal supplies sixty-two per cent of Philippine electricity but more than seventy per cent of the coal is imported, mostly from Indonesia and Australia. Since the war began, coal prices have risen up to thirty per cent. LNG prices have tripled. Diesel-fired plants that supply the Interruptible Load Programme are now economically catastrophic to run.

Brownouts already happening. On 13 May 2026, the National Grid Corporation placed Luzon on high alert with rotational brownouts affecting nearly two million people. By 15 May, both Luzon and Visayas were on red and yellow alerts. This is summer 2026 — before peak typhoon-season demand, before air-conditioning load truly bites.

Renewable energy potential, largely untapped. The Philippines is the world’s third-largest geothermal producer and has world-class solar, wind, hydro and biomass resources. In 2024 the country added a record 794 MW of new renewable capacity — a 294 per cent jump from 2023. The Department of Energy has awarded over 10 GW of new renewable capacity in recent auctions. None of this depends on the Strait of Hormuz.

The choice that defines 2028

There are two paths.

Path one is to keep doing what we are doing. Subsidise fuel through the Malampaya fund until the fund is exhausted. Suspend excise taxes. Negotiate sanctions waivers. Buy Russian crude. Beg ASEAN neighbours to relax export curbs. Hope the strait reopens. Pass the cost to consumers when it doesn’t. Watch industrial competitiveness erode, watch the peso slide, watch the import bill widen, watch coal plants emit more because that is what is available, and watch the 2028 election become a referendum on a government that managed a crisis without solving it.

Path two is to use the next twenty-four months to make the Philippines structurally less exposed. That means three things:

1. Accelerate distributed renewable generation. Solar plus battery storage at industrial sites, commercial buildings, hospitals, hotels, food processing plants. Every megawatt of behind-the-meter solar is a megawatt that does not need imported coal, LNG or diesel. Net metering rules already exist. The Renewable Portfolio Standard already exists. What is missing is the political urgency to remove permitting friction and unlock investment.
2. Electrify industrial process heat. This is the part of the energy system almost no one talks about, but it is where the Strait of Hormuz crisis bites hardest. Manila’s hotels, hospitals, food manufacturers, breweries, dairies and aviation maintenance facilities use LPG, diesel and fuel oil to make hot water, steam and process heat. A modern CO₂ or R290 heat pump replaces those fuels with electricity at roughly one-third the energy input. Paired with rooftop solar, the operational cost approaches zero and the Hormuz dependency goes to zero with it. An aviation MRO facility we work with in Manila is already running on this technology. A food manufacturer in Bulacan is doing the same. The technology is mature, the OEM partners are European with ten thousand units deployed across the EU, and the equipment can be deployed in months rather than years.
3. Build a strategic petroleum reserve that actually exists. Not just Petron’s commercial inventory. A government-owned ninety-day reserve at minimum, sited at the PNOC Industrial Park in Mariveles, financed through a soft-loan structure that attracts private capital. This is what every serious oil-importing economy does. Japan holds 208 days. The Philippines holds zero.

None of these are radical. They are basic energy security measures that should have been in place a decade ago.

What this means for the people in power right now

To the senators who will sit on energy and finance committees through 2027: the legacy of the 20th Congress will be defined by whether it amended the 1998 Downstream Oil Deregulation Law, whether it legislated a strategic petroleum reserve, and whether it accelerated renewable energy auctions and industrial electrification incentives.

To the cabinet secretaries facing committee hearings through 2026 and 2027: the question “what did you do during the energy emergency” will be asked in every confirmation, every appropriations defence, every media interview. “We secured Russian crude” is not the answer voters want. “We accelerated the transition off imported fuel” is.

To the local government executives — governors, city mayors, congressmen — whose constituents are paying ₱100 per litre at the pump: the political opportunity is to anchor a visible, constituency-level success story. A hospital, a hotel chain, a food processing plant, a hospital complex in your province that switched off LPG and switched on heat pump plus solar. Photo opportunities. Ribbon cuttings. Energy independence at the barangay scale. The CFO of every facility manager in your district is already running the numbers. They need political cover and procurement certainty. You can provide both.

To the candidates who will run in 2028: you have twenty-four months to decide whether you are the candidate who managed a crisis or the candidate who ended it.

A note from a Filipino-incorporated cleantech company

Karnot Energy Solutions Inc. was incorporated in the Philippines on 19 June 2025, with a BOI-SIPP application in progress, headquartered at the Low Carbon Innovation Centre in Mapandan, Pangasinan. We commercialise natural-refrigerant heat pump and cooling systems — CO₂ and R290 — manufactured by European OEM partners who have deployed over ten thousand units across the EU. Our customer footprint includes an aviation MRO facility in Manila with verified savings, a food manufacturer in Bulacan, hospitality groups, and active conversations with cold chain operators, hotels and hospitals nationwide.

We are not a foreign technology vendor passing through. We are a Philippine company solving a Philippine problem with technology that is already deployed at scale in markets that have already lived through Russia’s gas weaponisation and decided that imported fossil fuels are not a basis for industrial policy.

The Philippines is now living through its own version of that lesson. The question is whether we learn it in time for May 2028, or whether we still need to learn it after.