DOF expects Dubai oil to average $82.05/bbl
In 4th quarter
he Department of Finance (DOF) expects the Dubai crude oil price would remain above the $80 per barrel threshold in the fourth-quarter, giving the agency the reason to keep its recommendation to suspend the next increase in fuel excise tax.
Based on the monitoring of the DOF, the benchmark Dubai crude oil price would average $82.05 per barrel from October to December this year, well above the first three-quarter actual of per barrel.
The last-quarter forecast is also beyond the inter-agency Development Budget Coordination Committee’s (DBCC) new target range for Dubai crude oil of around $70 to $75 per barrel.
For October, the benchmark price is seen to average $82.78 per barrel, while $82.01 per barrel in November and finally, $81.37 per barrel the following month.
The finance department’s oil price forecast is based on the data provided by the Department of Energy on October 5 this year. For the first three months next year, the DOF expects the Dubai crude oil price to slightly drop to $80.6 per barrel, before it further decelerate to $79.43 per barrel in the second-quarter.
In the third-quarter 2019, the finance department expects the oil price to fall below the threshold at $78.01 per barrel and finally, settle at $76.24 per barrel in October to December next year.
The DOF expects the Dubai crude oil price would average $78.57 per barrel in 2019.
Earlier, Finance Undersecretary Gil S. Beltran said the higher costs of oil pump will boost the government’s valueadded tax (VAT) collection next year by at least billion should the Dubai crude price average $80 per barrel.
The estimated gains from VAT will help lessen the revenue impact of the suspended per liter fuel tax increase, which should have took effect in January 2019 under the Tax Reform for Acceleration and Inclusion Act (TRAIN).
Based on the DOF estimates, the suspension of the oil tax increase would result in billion in foregone revenues for the entire 2019. “Assuming the suspension is implemented for the entire year of 2019, its net revenue effect would be around loss,” Beltran said.
The finance official said the gains from VAT will be higher if the Dubai crude price averages more than $80 per barrel next year.
“If the [Dubai price] rate is higher than $80, then there will be additional gains. While the estimated loss from excise tax is fixed because it’s not relative to value,” said Belttan, who is also the DOF’s chief economist.
Finance Secretary Carlos G. Dominguez III had said the government may need to defer some non-infrastructure projects next year once the planned suspension of the higher excise tax on petroleum products is implemented.
Dominguez, however, is optimistic the suspension would not be in place for the entire 2019.
“We will have to cancel some noninfrastructure expenditures,” Dominguez said, citing there are government projects and programs explicitly identified under the TRAIN law as beneficiaries.