OIL firms gave a thumbs-up to a looming oil tax hike suspension, saying this will help soothe the plight of consumers who continue to feel the sting of inflation.
Independent Philippine Petroleum Companies Association (Ippca) President Bong Suntay said this is “a welcome treat for the consumers, particularly motorists.”
“Petro products have become a necessity for most Filipinos. A possible suspension of the fuel excise tax will be a big help to cushion rising prices of oil in the world market. Sadly, we can’t help prevent the spike because we are a net importer,” said Suntay in a phone interview.
The Philippines is a net importer of oil products. This means that the country’s fuel supply is generally sourced from abroad, making it vulnerable to changes in international oil price markets.
Latest data from the Department of Energy (DOE) showed that the country has been importing 94 percent of its oil requirements, with the total import bill jumping to $9.89 billion in 2017, a 31.2-percent increase from the $7.54-billion import bill in 2016.
Ippca has at least 16 members, mostly the country’s leading independent oil players, such as Eastern Petroleum, Unioil Petroleum Philippines Inc., Seaoil Philippines, Flying V, City Oil, Pryce Gases and LPGMA, among others.
Meanwhile, the Philippine Institute of Petroleum (PIP), composed of Petron Corp., Pilipinas Shell, Chevron, PTT Philippines and Isla LPG, shared the view of government officials.
“PIP welcomes this proactive stance by both the Executive and the Legislative as immediate mitigating measures to arrest inflation rise. While government authorities, such as the BSP, Neda, DOF and renowned economists recognize the minimal impact of petroleum product prices relative to other major commodities in the basket of goods and services, the psychological impact of petroleum price rise come into play,” said PIP Executive Director Teddy Reyes in an interview.
As mandated by the TRAIN law, fuel excise taxes increased by P2.5 per liter this year, and the levy is scheduled to rise by P2 and P1.5 per liter in 2019 and 2020, respectively, for a total P6-excise tax hike over three years.
The TRAIN law states, however, that “for the period covering 2018 to 2020, the scheduled increase in the excise tax on fuel as imposed in this section shall be suspended when the average Dubai crude oil price based on Mean of Platts Singapore [MOPS] for three months prior to the scheduled increase of the month reaches, or exceeds $80 per barrel.”
Price of Dubai crude rose 43 percent to $77.02 per barrel in September from $53.86/bbl a year ago and by 6.78 percent from August’s $72.23 per barrel. Prices averaged $82.278 per barrel in the 10 trading days to Oct. 12, or 50.69 percent more than the $54.602 per barrel in last year’s comparable period.
Reyes said that by January 2019 the proposed additional increases of P2 per liter for gasoline, P2 per liter for diesel, P1 per kg of LPG, P2 per liter for kerosene shall not be implemented if the suspension is indeed carried out.
Oil firms recently implemented a price rollback after nine consecutive weeks of oil-price increases. Diesel prices went up by a cumulative P5.85 per liter, gasoline by P5.05 per liter and kerosene by P4.65 per liter from August 14 to October 9.
Consumers pleased
Consumer advocacy group Laban Konsyumer Inc. (LKI) also welcomed the good news.
“LKI had been advocating against fuel excise taxes and had filed a Supreme Court case in January vs the TRAIN law,” the group said.
“May we add that the President consider replacing Cabinet secretaries whose behavior in the past months contributed to the high inflation. Lastly, all cash assistance to beneficiaries under the TRAIN law be given, considering the windfall value-added tax collected by the government derived from the high oil prices,” said LKI President and former Trade Undersecretary Victor Dimagiba.
The call for suspending the oil excise tax had mounted after inflation accelerated in recent months. More expensive fuel was tagged as a major factor behind the rise in consumer prices.
Various groups have been calling for the suspension of oil excise taxes, amid rising inflation, which surged to a nine-year high of 6.7 percent in September.
Over the weekend, Special Assistant to the President Christopher Lawrence T. Go said that the government was “seriously considering” suspending the next round of increase in oil excise taxes.
Economic managers reportedly support that move, and the President considered the idea after getting a letter from 17 proadministration senators.
Image credits: Alysa Salen