Cause and effect

For seven straight weeks, oil firms have been increasing their prices, which have brought more heartaches to Filipinos who are already reeling from high prices as a result of the still far from normal situation due to the pandemic.

Department of Energy (DoE) data showed that, thus far, gasoline prices have increased P12.35 per liter, diesel by P10 per liter, and kerosene by P8.35 per liter compared to prices a year ago.

West Texas Intermediate and Brent crude prices have increased to about $67 to $69 per barrel, while the weakening peso is also a result of pressures for prices to increase.

Dubai crude, which the government tracks as basis for local prices, has been hovering around $66 per barrel.

The local currency breached the P50 per dollar mark, making it more expensive to buy imported crude oil.

Industry experts said oil prices in the global market have been steadily rising as demand is returning due to reopenings in China and the United States, as well as other parts of the world.

The Organization of the Petroleum Exporting Countries and its allies are gradually raising production, but not at the same pace as the rise in global demand.

Energy officials said the uptrend in prices is being closely monitored, and a mechanism in the Tax Reform for Acceleration and Inclusion (TRAIN) law provides for relief through the suspension of excise tax when a trigger price is reached.

A provision in the TRAIN law allows the suspension of the increase in fuel excise tax when Dubai crude oil price based on the Means of Platts Singapore averages $80 per barrel for three consecutive months preceding the next scheduled increase.

Should the price of Dubai crude keep going up and the three-month average in the last quarter of this year hits $80 per barrel, we will be ready to activate the suspension mechanism, according to economic officials.

While the tax is a substantial component of the prices of fuel, the government relies heavily on it for social financing, the source for which in the fiscal stream has been greatly diminished as a result of the economic slowdown.

Aside from the excise tax cut, the TRAIN law also provides measures to protect the public from rising prices of oil products through grants, such as the unconditional cash transfer and fuel vouchers.

Some P24 billion are raised mainly from fuel and sin taxes to cover the poorest 10 million households under the unconditional cash transfer program, or the so-called Pantawid Pamilyang Pilipino Program.

Energy officials also convinced last March major petroleum companies, such as Pilipinas Shell, Phoenix Petroleum and Petron, to provide fuel discounts to public utility vehicle drivers.

Economic officials said implementing a sudden reduction in excise tax will throw off key projects for the poor, because appropriations for these have already been projected.

The consideration, thus, is that while reducing the excise tax as demanded by some groups will be publicly palatable, it will be undertaken at the expense of projects that target the poorest sectors of the society.

“While reducing the excise tax as demanded by some groups will be publicly palatable, it will be undertaken at the expense of projects that target the poorest sectors of the society.

“Oil prices in the global market have been steadily rising as demand is returning due to reopenings in China and the United States.