Stronger investments in renewable energy, particularly geothermal power, could have lessened the impact of soaring oil prices on the Philippines' electricity sector, according to energy economists.
Global oil prices have surged following military actions involving the United States, Israel, and Iran, sending shockwaves through economies worldwide. The Philippines, with its heavy reliance on imported fossil fuels and historically limited investment in renewable energy, has been especially vulnerable to these market fluctuations.
While a temporary ceasefire provided brief relief from even steeper price increases, the Department of Energy projects diesel prices could reach between ₱185 and ₱230 per liter, with gasoline prices ranging from ₱140 to ₱175 per liter.
Meanwhile, electricity prices in the Wholesale Electricity Spot Market (WESM) jumped by 52.5 percent in April, according to the Independent Electricity Market Operator of the Philippines. These wholesale price increases may eventually be passed on to consumers through their electricity bills.
University of the Philippines School of Economics professor Karl Robert Jandoc explained that oil price increases often drive up costs for other fossil fuels like coal and natural gas, which together account for 76.6 percent of the country's energy mix based on 2023 International Energy Agency data. With more than half of the Philippines' coal supply imported, local energy prices remain highly exposed to global market volatility.
"Renewable energy could cushion the economy by providing a domestic, stable and relatively cost-competitive source of electricity," Jandoc said.
Among renewable sources, geothermal energy offers particular advantages as a "baseload" power source capable of generating electricity 24 hours a day, unlike intermittent solar and wind power that cannot always meet peak demand.
"If the Philippines had expanded geothermal capacity earlier, dependence on imported coal would likely have been lower, which could have softened the pass-through of global fuel price shocks into electricity prices," Jandoc added.
The economic concept of "pass-through" describes how changes in input costs—such as oil needed to transport imported coal and gas—are reflected in output prices like electricity. Higher oil prices also increase transportation, logistics, and production costs that often get passed on to food and other essential goods.
Despite its potential as a buffer against oil price shocks, geothermal energy currently represents only 9.1 percent of the country's power grid, according to IEA data. Geothermal power also produces significantly fewer emissions and pollutants than fossil fuel-based generation.
"Earlier investment could have delivered both energy security and cleaner growth," Jandoc noted.