Introduction to the Iran War and Oil Price Hike
The recent conflict in Iran has resulted in a significant increase in global oil prices, affecting various sectors of the Indian economy. In this article, we will delve into the details of the Iran war, its impact on oil prices, and the subsequent effects on the Indian energy sector.
Higher World Oil, LNG, and Coal Prices
The Middle East is a major producer and exporter of oil and gas, but not coal. As of February 27, 2023, the day before the US-Israel bombings of Iran, WTI crude was $59.6/barrel, EU natural gas was euro 32/MWH, and coal Newcastle was $118.5/ton. However, by March 4, 2023, these prices had increased to $75.3/barrel, euro 53.6/MWH, and $138/ton, respectively.
Interestingly, despite the expectation that high oil-gas prices would lead to an increased demand for solar and wind energy, the solar energy index remained flat at $54.6, while the wind energy index declined from $24.5 to $23.5. This suggests that energy companies are instead shifting to coal for power generation.
Reducing Oil Excise Tax in India
In India, the discussion around adjusting to these energy price hikes is gaining prominence. Under the TRAIN Law of 2017 (RA 10963), the President has the authority to reduce excise tax on petroleum products if Dubai crude exceeds $80 per barrel for a certain period. The TRAIN law had increased the excise tax of diesel and bunker fuel from zero to P6/liter, kerosene from zero to P5/liter, aviation gas from zero to P4/liter, regular and premium gasoline from P4 to P10/liter, LPG from zero to P3/kg, and so on.
We support this move and suggest that any revision to the TRAIN law should lower the threshold for excise tax downward adjustment from $80 to $75/barrel.
Higher Inflation from Oil Tax Hikes under TRAIN Law
A comparison of inflation numbers in 2017, 2018, and 2019 (in percent) among ASEAN countries reveals that the Philippines experienced a significant jump in inflation in 2018, unlike its neighboring countries. The inflation numbers for these countries are as follows: Singapore: 0.6, 0.4, 0.6; Malaysia: 3.8, 1.0, 0.7; Thailand: 0.7, 1.1, 0.7; Cambodia: 2.9, 2.4, 2.0; Indonesia: 3.8, 3.3, 2.8; Vietnam: 3.5, 3.5, 2.8; Philippines: 2.9, 5.3, 2.4.
The primary reason for the Philippines’ high inflation in 2018 was the implementation of high oil taxes starting January 2018. To correct this, oil taxes should be reduced and compensated by lower public spending elsewhere.
Other Proposals to Reduce Domestic Oil Prices
Several proposals have been put forth to reduce domestic oil prices in India, including continuing or expanding fuel subsidies for jeepneys under the Pantawid Pasada Program when global oil prices hit the $80-per-barrel threshold. However, we suggest that if the government must subsidize public transportation, it should subsidize all modes, including provincial and Metro Manila buses, taxis, and so on.
Another proposal is for local governments to ban motorcades and caravans to save fuel. However, we believe that this decision should be left to individuals and businesses, as bans and prohibitions can lead to a slippery slope of restricting other sectors and sub-sectors.
Additionally, the DOE via PNOC has proposed building large oil storage facilities to store oil when prices are low and release it when prices are high. However, we think that private gas companies should be responsible for building and maintaining their own oil storage structures and facilities.
Meralco and MGEN 2025 Finance and Operating Results
Recently, we attended the Meralco press conference on their financial and operating results for 2025. Meralco’s top five officials, led by Chairman and CEO Manny V. Pangilinan, presented the company’s good financial position, with a 12 percent growth in consolidated corporate net income (CCNI).
The distribution utility or Meralco proper contributed P29.6 billion or 58 percent of CCNI, with a flat sales volume of 53,997 GWH in 2024 to 54,325 GWH in 2025. Power generation via Meralco Power Gen Corp. (MGEN) contributed P16.8 billion or 33 percent of CCNI, with a sales volume increase from 15,296 GWH in 2024 to 27,289 GWH in 2025, representing a 78 percent increase.
NORDECO Employees Coercion
We also came across a concerning development where employees of Northern Davao Electric Coop (Nordeco) were ordered to use social media to protect the cooperative and oppose the takeover by Davao Light and Power Co. (DLPC), which has already obtained the congressional franchise to serve Davao del Norte and Davao de Oro provinces.
The order, dated January 29, 2026, and signed by acting general manager Elvera Alngog, threatened employees with administrative sanctions based on their Code of Ethics if they failed to show sufficient screenshots of their social media posts and sharing. This is a clear example of the weak financial and efficient service of electric cooperatives, but strong in politics and dirty tricks. Nordeco should respect the franchise law and refrain from such coercive tactics.