By AFTER more than two months of pump price increases, oil firms announced Monday they will bring down prices of their petroleum products this week.
Gasoline and diesel prices will each be reduced by P0.20 per liter, while kerosene price will be slashed by P0.50 per liter.
Despite the small amount of price rollback, motorists welcomed the reprieve from the 11 consecutive weeks of price increases in diesel and kerosene, and 10 straight weeks of increases for gasoline prices.
Based on data, this week’s price adjustment resulted in a year-to-date net increase of P17.30/liter for gasoline, P13.40/liter diesel and P9.45/liter for kerosene.
Local oil firms adjust prices every week to reflect movements in the world oil market. Since the Philippines is a net oil importer any spikes in international oil prices push up local pump prices.
The series of upward price adjustments were triggered by global production cuts recently implemented by the Organization of the Petroleum Exporting Countries (OPEC). Saudi Arabia and Russia have extended their oil export cuts by one million daily and 300,000 barrels per day, respectively.
For the remaining weeks up to the end of the year, the Department of Energy (DOE) – Oil Industry Management Bureau Director Rino Abad said there could be “both increases or decreases” in local fuel prices.
“Since there is no change of OPEC+ production cut policy until the end of the year hence by implication we still expect that the international price of crude oil will stay at the current level of around $90/ barrel,” added Abad.
However, Abad said it is not expected that the decrease will go at the low level of $77 per barrel for crude oil that was seen way back March before the implementation of this year’s new sets of production cut.
Prior to this week’s price adjustment, there were proposals to suspend the fuel excise tax for three months to mitigate the impact of soaring fuel prices.
Earlier this month, the Department of Budget and Management (DBM) announced that it had approved the release of P3 billion for the fuel subsidy program, targeting 1.36 million beneficiaries in the transport sector affected by the fuel price surge.
Oil industry calculations show that a suspension could reduce fuel prices by around P10 per liter and bioethanol by P4 per liter. The move will, however, result in an estimated revenue loss of approximately P4.9 billion per month or around P14 billion over the next three months.
“The P14 billion is a small price to pay to provide immediate relief to millions of Filipino consumers who would instantly be able to buy fuel at P10 less per liter,” Infrawatch PH Convenor Terry Ridon said, adding that the proposed tax relief “invariably increases disposable income, stimulating consumer spending and, by extension, the economy.”
However, Finance Secretary Benjamin Diokno said tax suspension proposals could harm the economy and government finances.
“Any of the proposals will adversely affect our economic and fiscal recovery, our international credit ratings, and our overall debt management strategy, while benefiting primarily the rich and without providing lasting inflation relief,” he reportedly said.
Based on estimates, the Department of Finance said if value added tax (VAT) and excise taxes on fuel are suspended, the government will lose around P72.6 billion in the last quarter of this year—P41.4 billion on excise tax and P31.2 billion on VAT.
Diokno said these figures were already programmed under the 2023 budget to fund priority projects and programs.
However, Infrawatch said, “Secretary Diokno’s assertion that such a move would solely benefit the wealthy overlooks that removing—or even simply suspending—taxes invariably raises disposable income. Cutting taxes puts more money in everyone’s pocket, enabling them to buy more goods and services, ultimately stimulating the economy,” Ridon, former House energy committee member, said.
DOE Undersecretary Sharon Garin said last week that there could be no immediate measure—other than the government’s Pantawid Pasada Program—to help ease the impact on consumers. “An immediate solution that government can do is spend for Pantawid Pasada to support the drivers. The rest, basically, they are advised [to adopt] cost cutting measures…Let’s bear it out ‘till next three months,” she said.
The local oil industry uses Mean of Platts Singapore (MOPS) which is the daily average of all trading transactions between buyer and seller of petroleum products as assessed and summarized by Standard and Poor’s Platts, a Singapore-based market wire service.
For every $3 change in MOPS, the DOE said there is a P1 per liter increase or decrease in domestic oil price. However, this rule of thumb has many assumed variables, including peso-dollar exchange rate range, such that a significant change in any variable would no longer make the formula reliable.