The Department of Energy (DOE) convened oil companies late Tuesday to discuss various ways to cushion impact of spiraling prices of petroleum products.
“We talked about how to cushion the impact of rising oil prices. A lot of options were discussed and they will get back to us once they have made their position,” said DOE secretary Alfonso Cusi in a text message Wednesday.
During the meeting, Cusi said “bigger fuel price discount and staggered implementation of oil price increases” were raised.
“Part of the discussion was unbundling of prices so that the public will have a better understanding on how oil companies came up with the pricing. Of course, we asked if they can provide more discounts especially to public utility vehicles. Other options are stagger the implementation and enforcing the Pantawaid Pasada,” said Cusi.
The Pantawid Pasada or the Public Transport Assistance Program, which was first rolled out in 2011, is an immediate mitigating program to shield the vulnerable sectors from the impact oil price hikes.
Under the program, holders of legitimate PUV franchise holders were given cash cards worth P1,050 to buy fuel from accredited gasoline stations.
The oil firms have yet to agree on some of the proposals laid on the table. “These are all exploratory. The oil companies said they still need to study. They will get back as to us immediately,” added the energy chief.
Local pump prices shoot up Tuesday, reflecting movements in the international petroleum market. Gasoline prices now jumped by P1.60 per liter, diesel increased by P1.10 per liter and kerosene shoot up by P1 per liter.
From January to May 2018, gasoline prices increased P 8.07 per liter, while diesel is up P 8.95 per liter.
Cusi cited world events affecting local pump prices. These include US announcement on possible sanction on Iran; Venezuela crude production dropped from 2.3 million barrels per day (b/d) to 1.5 b/d due to the ongoing economic and political crisis, latest of which is the controversial Presidential Election; and OPEC (Organization of Petroleum Exporting Countries) is deepening the supply cut led by Saudi Arabia which announced its desire to increase the price of crude to at least $80/b to balance its budget.
The energy chief added that US oil importers were already advised to look for alternative supply of oil to replace oil coming from Iran. Iran owns 12% of the OPEC supply amounting to 32million barrel / year.
Cusi said his agency continuous to monitor crude prices in the world market.
Oil prices are already at $79 per barrel, the highest mark since November 2014.
Local pump prices are also influenced by the peso-dollar exchange rate and taxes.
For this year, excises taxes on gasoline stood at P7 per liter, P2.50 per liter for diesel and P1 per liter for liquefied petroleum gas. A second round of higher excise taxes will be slapped next year and the year after.
“There is a mechanism on the implementation of excise tax when oil price reaches a certain level,” commented Cusi, who was referring to the suspension on the imposition of excise tax if and when crude prices reached $80 per barrel in three consecutive months.
Cusi, meanwhile, agreed on a proposal to conduct a forecast on the expected price of crude oil over the next six months and, at the same time, lead the preparation of strategies that would minimize the impact of surging prices.
“The DOE must ensure that it provides accurate estimates, so the government may be guided in crafting both immediate and long-term ways to insulate the country from shocks in the global oil market,” Senator Sherwin Gatchalian, who also leads the senate energy committee, said last Monday.
The senator also pointed out that government must prepare in the event that crude prices will reach the $100 per barrel threshold in the global market.
The DOE said late Wednesday that oil firms expressed willingness to give discounts and widen their CSR programs to support the transport sector and even the marginalized which will be formalized through a Memorandum of Agreement (MOA) with the DOE. At present, PUVs avail of a P1.00/liter discount under an existing MOA between the DOE and only three oil firms–PETRON Corporation, Pilipinas Shel and Phoenix Petroleum. Also, the DOE is closely coordinating with the Department of finance to discuss new measures concerning the excise tax and value-added tax on oil as a result of the implementation of the Tax reform Acceleration Program (TRAIN Law). The DOE will also be working with the Department of Transportation for the swift implementation of Section 82 of the TRAIN law on fuel vouchers for Public Utility VEhicles (PUV) and pursue the DEpartment’s efforts to expedite the unbundling fuel prices.
Image credits: Alysa Salen