During the 2022 crisis, Brent Crude prices hit USD 120 per barrel for the first time since 2014 due to the Ukraine-Russia conflict. This caused Philippine diesel prices to surge by more than Php 30 per liter within a year. In turn, this led to the ballooning of NPC-SPUG’s payables to its diesel suppliers to more than Php 5 billion (≈ USD 95 million). 

The doubling of diesel prices, coupled with a fixed UCME fund, left NPC-SPUG without sufficient cash to settle its fuel suppliers. Between January and May 2023, NPC-SPUG power plants implemented rotating brownouts across Palawan, Masbate, Marinduque, and Catanduanes due to budget constraints for diesel procurement. In some areas, electricity supply was limited to 6 to 12 hours a day.

The increasing utilization of the UCME Fund is reflected in the 15% cumulative annual growth rate of the UCME Rate charged to all on-grid consumers from 2022 to 2026. During this period, the UCME Rate increased from Php 15.61 cents per kwh to Php 27.63 cents per kwh. In February 2026, the UCME registered its highest increase in five years, rising by 38% year-on-year, allowing NPC to catch up and settle most of its arrears from fuel suppliers, service its loans, and prevent blackouts in NPC-SPUG areas, among others. The NPC based its requirements on a projected fuel price of Php 77.0692 per liter and a total diesel volume of about 198,620 kiloliters, and has not yet accounted for increased price volatility due to global conflict.

To cushion the impact of oil price shocks from geopolitical conflicts, the Philippine government has implemented measures to lessen NPC’s exposure to global price volatility. NPC is undertaking its Accelerated Hybridization Program (AHP), which aims to launch 14 initial diesel-solar-battery hybrid plants, with 25 additional sites planned by the end of 2026. Through AHP, NPC plans to reduce diesel consumption by at least 20% in the power plants, with the end goal of reaching 100% transition to RE by 2030 across all NPC-SPUG areas. Since the 2022-2023 crisis, the national government initiated new safeguards, including Php 2.5 billion (≈ USD 47.5 million) in the 2025 budget for available fuel subsidies to NPC and allowing NPC to borrow from banks to pay fuel suppliers pending the release of subsidies from the UCME fund. 

Notwithstanding these measures, anticipated disruptions in the flow of diesel supply could further exacerbate the situation. Existing DOE regulations require oil companies to maintain a minimum inventory equivalent to fifteen (15) days of supply of diesel.⁶ As of the date of this report, the DOE confirmed the Philippines has a supply of finished petroleum products of about 60 days, which provides a buffer against immediate shortages, even if it doesn’t stop the price from rising.

The Organization of Petroleum Exporting Countries (OPEC) has signified its intent to increase oil production at a modest rate to soften any price volatility resulting from the ongoing conflict in the Middle East.⁷ Should global tensions subside towards the end of 2026, there may be a surplus in global oil markets, which could effectively keep local diesel prices at Php 55 to Php 65 per liter. “In these scenarios, let’s pray we will not reach Php 77, allowing the NPC to keep its buffers intact–but we should be prepared for any eventuality,” Mr. Carpio said.