Oil pump prices to surge by P6 per liter

Published December 10, 2017, 10:01 PM By Myrna M. Velasco

https://business.mb.com.ph/2017/12/10/oil-pump-prices-to-surge-by-p6-per-liter/

With the Duterte administration-sponsored tax reform measure almost done at the legislative bicameral level and already inching close to its signing into law, Filipino consumers are almost certain to meet the new year with a punishing P6.00 per liter tiered increases in fuel prices.

In the calculation of the country’s oil companies, the increase in diesel prices could be at P6.72 per liter with value-added tax (VAT) as it will be coming from a zero excise tax level; while for gasoline, it will be at P5.65 per liter on top of the P4.35 per liter excise tax component of current pump costs.

With the VAT component, the total increase for gasoline pump prices will likely be at P6.35 per liter, based on the estimates given to Manila Bulletin by leading oil industry player Petron Corporation.

At prevailing prices of over P35 to P36 per liter for diesel, that will soar to P41 to P43 per liter at the oil firm stations; while for gasoline, the increases could pull up pump prices to P55 to P58 per liter, running close already to the level when global oil prices skyrocketed to $100 per barrel prior to hitting its peak of US$147 per barrel in July 2008.

Such pump price surges will be courtesy of the Tax Reform Acceleration and Inclusion (TRAIN) Act, in which the Department of Finance (DOF) intends to collect as much as R807.4 billion worth of revenues from higher excise taxes from the oil sector alone.

On year one, the targeted revenue collections from hiked fuel excise taxes would be P36.1 billion (that should have been for the second half of 2017); then P120.9 billion in 2018; P147.2 billion in 2019; P156.9 billion for 2020; P167.6 billion for 2021; and P178.7 billion for 2022.

Beyond the punishing impact of such increases to Filipino motorists as well as the commuters, oil industry players are also raising alarm bells on the “inflationary pressure” that such adjustments would create on the prices of basic commodities and services.

That will be on top of apparent knock-on trigger it will have on transport fare hikes and the spiraling effect to major industries, such as the use of diesel in power facilities, generally the deployed technology in off-grid areas. In the end, that is seen increasing the subsidy component also being paid by electricity consumers in the areas served by the Small Power Utilities Group (SPUG) of the National Power Corporation.

According to Shell Philippines Chief Executive Cesar G. Romero, they are currently re-assessing the impact of the anticipated pump price increases.

He said “that is something to be evaluated because at the moment, we’ve seen highest price points in the country. So far, P64 per liter was the highest price point when crude was over $100 per barrel, so the higher excise tax, that could go up to P56 per liter from average of P50 at present.”

PTT Philippines somehow noted the ‘price cushion measure’ that is being integrated in the tax reform bill, such as the US$80 per barrel trigger point in which the government may need to suspend the enforcement of the excise taxes.

“Certainly, there will be an immediate effect on pump prices, and perhaps, even on the demand for fuel. But we are also looking at factors on when global oil prices will go down, so that the corresponding increase will also be down,” PTT Philippines Trading Corporation General Manager Danilo Alabado said.

The “cost trigger mechanism” in the measure, he emphasized, will help temper the cost impact on consumers, thus, these have been among the factors that the oil companies have been re-evaluating.