Demand for electric vehicles (EVs) in the country is expected to accelerate as escalating military conflict in the Middle East threatens to drive global crude prices toward record highs, according to the Asian Development Bank (ADB).

In a briefing, James Villafuerte, ADB regional lead economist, said the prospect of Iran-related supply disruptions is pushing price forecasts toward $200 per barrel that likely to force consumers to reconsider traditional internal combustion engines in favor of hybrid or electric alternatives.

“I think with rising fuel prices, most people will probably begin to seriously consider either hybrid vehicles or EVs,” Villafuerte told reporters.

While the Philippine government has established formal targets for EV adoption, Villafuerte noted the country currently trails regional peers including Thailand, Singapore, and Indonesia.

He attributed this lag to those nations’ established status as automotive manufacturing hubs, which provides a natural infrastructure and supply chain advantage for the electric transition.

Albert Park, ADB chief economist, told reporters that the economic argument for EVs becomes significantly more compelling as fuel costs rise.

He noted that elevated prices increase the direct economic gains for private consumers who make the switch.

From a fiscal policy perspective, Park argued that the return on government investment in renewable energy infrastructure improves substantially when oil remains expensive.

He added that it is not merely the level of prices but the inherent uncertainty and frequency of supply shocks that create the necessary economic incentives to hasten the green transition.

Addressing potential government responses to energy inflation, the ADB cautioned against broad fiscal measures such as cutting fuel excise taxes.

Park stated that a blanket reduction in excise duties would disproportionately benefit wealthier individuals who consume more fuel, rather than the most vulnerable segments of the population. Instead, the multilateral lender advocates for targeted interventions.

Villafuerte suggested that income or food subsidies for the poorest sectors would yield a better social impact than lowering oil duties.

He asserted that maintaining current tax levels prevents sending the wrong signal to the market, noting that reducing taxes on gasoline—a pollutant—diminishes the incentive for the public to reduce consumption.

Under the current Tax Reform for Acceleration and Inclusion Law, premium unleaded gasoline is taxed at ₱10 per liter, while diesel carries a levy of ₱6 per liter. Kerosene and liquefied petroleum gas are taxed at ₱5 and ₱3 per liter, respectively.

Data from the Bureau of Customs show that the government collected ₱247.1 billion in excise taxes from petroleum products through its fuel marking program last year, a 1.9 percent increase from the ₱242.4 billion collected in 2024.