EXPLAINER: What is national oil stockpiling?

This week, Energy Secretary Sharon Garin announced that sovereign wealth fund Maharlika Investment Corporation (MIC) and the Philippine National Oil Company (PNOC) are finalizing an agreement on a national oil stockpiling program.

Fuel prices have surged since the US and Israel's attack on Iran at the end of February, which led the Islamic republic to force the closure of the Strait of Hormuz, the narrow waterway between Iran and Oman which in normal circumstances handles a fifth of the world's oil and liquefied natural gas traffic.

The Philippines, a net importer of fuel, has been in a state of national energy emergency since March due to the ongoing conflict in the Middle East.

But what is a national oil stockpile?

A national oil stockpile is a strategic reserve of crude oil and refined petroleum products maintained by the government.

It is akin to an emergency fund, but instead of cash, the government will holds millions of barrels of oil designed as buffer against sudden disruptions such as geopolitical conflicts, natural disasters, and extreme price volatility.

A national oil stockpile is different from the fuel inventories maintained by the industry, which are mandated to maintain 15 days' worth of stock requirement.

The release of the national oil stockpile to the market could be triggered by the government when global oil supplies are choked to ensure supply continuity and prices are stable.

For the Philippines’ national oil stockpile, Garin gave an indicative cost and timeline, but said that an estimated P5 billion would be needed to build a system that would carry some 500,000 to 1 million barrels.

Stockpiles are usually located in alongside existing supply chains—refineries, pipelines, and import terminals—to ensure they can be deployed quickly.

The DOE said the government is studying options to establish an additional strategic reserve that would further strengthen the country's ability to respond to unforeseen disruptions.

The Japanese government has expressed support for the Philippines’ planned national petroleum reserve program, committing to provide technical assistance and assist with feasibility studies and capacity-building programs, drawing on its extensive experience in strategic petroleum reserve development.

The Energy Department said feasibility studies, site evaluations, financing options, and implementation models are now being developed. Initial assessments indicate that the project may be implemented in phases, allowing the government to gradually build strategic inventories over time.

A technical mission involving Japanese government institutions and private sector partners is expected to visit the Philippines later this year to support planning and feasibility activities. — BM, GMA News