Amid greater global uncertainties, oil prices in the global market may still rise further in the coming months, analysts warned.
This, even as crude prices have recently been moderated with the increase in the output of the Organization of the Petroleum Exporting Countries (Opec) to make up for the production shortfalls in Iran and Venezuela.
“Global oil markets are so uncertain now,” IBON Executive Director Jose Enrique A. Africa told the BusinessMirror. “Prices can still go up if those production shortfalls deepen in the coming months. Geopolitical tensions around Iran, Saudi Arabia and Turkey or even around Libya and Nigeria can also worsen. Amid such uncertainty, we expect that prices will tend to rise more than go down.”
The Department of Finance (DOF) pointed out last week that uncertainties in the global economy arising from the trade war between the United States and China, among others, had led to the volatility in world crude oil prices.
This was after the Dubai crude price dropped 2.9 percent to $80.188 per barrel on October 12, from $82.577 per barrel on October 8 this year.
Dubai crude oil futures are also seen to dip from November to April, based on DOF data.
However, former Socioeconomic Planning Secretary Romulo V. Neri warned that “the Khashoggi affair put oil prices under greater uncertainty” and may increase the likelihood that oil prices will still hit $80 per barrel in the coming months.
International reports said oil prices are feared to rise in the global market in the killing of Saudi journalist and US resident Jamal Khashoggi inside the consulate office in Istanbul.
The Saudi government has admitted that Khashoggi was killed inside the Saudi consulate.
However, Neri said this still depends on how the issue will be handled.
“They’re dribbling the ball so far,” Neri told the BusinessMirror.
But Maria Ella C. Oplas, economics professor at De La Salle University, sees the oil prices going down because of the huge output from the US.
“If you look at US output, you will know that they will swamp the market bringing the price down,” Oplas said.
The Tax Reform for Acceleration and Inclusion (TRAIN) law provides 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.”
Nonetheless, Africa urged the DOF and the Department of Energy (DOE) to be more transparent in sharing their assessment on whether the trigger price of $80 per barrel of Dubai crude has been breached yet.
“They can also be more explicit about whether they are really just narrowly looking at the dollar price of oil or, as is more, sensible, converting into its peso terms,” he said, noting that they estimated that the trigger price at $80 per barrel equivalent to P4,032 has already been breached in September and in October at P4,037 per barrel and P4,258 per barrel to date, respectively.
“At this rate, the September to November period should already be enough to suspend the next tranche of [increase in] oil [excise] taxes, according to TRAIN’s limited suspension mechanism,” he added.
Due to the continuing increases in fuel prices, the Land Transportation Franchising and Regulatory Board has green lighted the increase of jeepney fares to P10, from the provisional P9. They have also approved the approved the P1 fare adjustment for ordinary buses in Metro Manila from P10 to P11 and, from P12 to P13 for air-conditioned bus while its per-kilometer charge of P2.30 remained.
However, these adjustments will only take effect 15 days after publication.
This, as September inflation surged to a new nine-year high at 6.7 percent.