TRAIN, new ship fuel policy to drive up oil prices

Published December 29, 2019, 12:00 AM

by manilabulletin_admin


The combined implementation of the last tranche of increases in excise taxes for petroleum products under the Tax Reform for Acceleration and Inclusion (TRAIN) Act and the new shipping fuel regulation globally will significantly drive up oil prices starting January through April next year.



But, unlike the previous two tranches in the increases in excise tax on fuel products, consumer group Laban Konsyumer Inc. (LKI) said there should be no increases in prices of basic necessities and prime commodities (BNPCs) because of favorable factors: lower water and power rates.

On the hiked TRAIN excise taxes, the additional increases will be at ₱1.68 per liter for diesel; ₱1.12 per liter for gasoline; ₱1.12 per liter for kerosene; and ₱1.12 per liter also for liquefied petroleum gas (LPG) – already inclusive of value added taxes (VAT).

The oil companies can already jack up excise taxes in petroleum products once their inventories as of December 31, 2019 had been fully used up or sold at the pumps. This means that oil firms can effect higher prices starting January 1, 2021 but with certain inventories still left price hikes are expected to happen between mid-January to second week of February gauging from last year’s implementation of the second tranche increase in fuel excise taxes.

Energy Secretary Alfonso G. Cusi reiterated that the manner of implementation of the last tranche of excise taxes would be the same as last year, stressing that oil companies would have to sell all of their existing inventories first before imposing the higher taxes on new products to be shipped at their terminals and subsequently sold at the retail pumps of gasoline stations.

To ensure against premature price hikes, the DOE has required oil companies to submit their respective inventory data so the government can fully ascertain on when the warranted price adjustments can be expected at the pumps.

By then, the total increase in excise taxes for gasoline products would already be at ₱10 per liter; ₱6.00 per liter for diesel; ₱3.00 per liter for LPG; and ₱5.00 per liter for kerosene – all still exclusive of VAT charges.

The higher excise taxes for oil commodities are revenue-generating measure for the State coffers so it could raise much-needed hard cash that could help finance the line-up of infrastructure projects for the country.

Aside from the jacked up excise taxes, the DOF is likewise targeting to fetch up to ₱20 billion worth of additional revenues from its fuel marking policy for the downstream oil sector.

Aside from the excise taxes, the DOE also cautioned Filipino consumers of additional oil price hikes due to the new shipping fuel regulation as prescribed by the International Maritime Organization (IMO).

Based on the numbers crunched by the energy department, the cost impact of the stricter sulfur content on shipping fuel will amount to ₱5.0 to ₱7.0 per liter – and that is expected impacting on domestic prices between March to April next year.

The new shipping fuel regulation will similarly make a dent on power costs because this will affect the shipment of products that have been running the country’s electric generating plants – including coal and liquid fuels like diesel and bunker-C commodities.

The IMO prescribes that starting January 2020, the sulfur content of bunker fuel used in shipping vessels shall already be capped at 5,000 parts per million (or 0.5%) from currently at 35,000 ppm (3.5%).

Power generation companies have sounded off early on that the shift of shipping vessels to low sulfur-content marine fuel could hike freight costs that will in turn result in higher pass-on cost effect to the electricity consumers – and that will likely be felt in the power bills around March to April next year.

As explained by the energy department, fuels feeding the country’s power plants (coal and oil in particular) are being shipped into the country through large vessels; and that shall be the segment to be impacted in the scheduled change of fuel usage by the maritime industry at the starting month of the new decade.
Unlike the first two tranches in oil prices under the TRAIN Law, the third and final tranche comes at a time where there are mitigating factors to cushion increases in prices of BNPCs.

Consumer group Laban Konsyumer, Inc. (LJKI) President Victorio Mario Dimagiba said the lower power and water rates should help maintain the prevailing prices or the Suggested Retail Prices of BNPCs. The lower power and water rates should also offset the added cost on goods and services due to the implementation of the third tranche of the excise taxes on fuel products.

Dimagiba cited that water concessionaires had deferred the collection of the 2nd tranche of approved water rate hike in the amount of ₱1.95 for Maynilad and ₱2.00 for Manila water, per cu m due for collection in January 2020.

Keeping the power rate steady is the reduction by at least .02 centavos per kwh on the ₱0.22 per KWH FEED in Tariff Allowance based on Transco written manifestation submitted to the Energy Regulatory Commission. LKI sees a .04 pkwh rollback, however.

Also, Meralco shall pass on to the consumers the impact of their new Power supply agreements not later than the February billing cycle of at least the maximum of .40 per kwh based on Provisional Authority issued by ERC . LKI had supported Meralco’s petitions in the ERC.

“All concerned agencies should intensify price and supply monitoring and enforcement into the new year accordingly,” urged Dimagiba.

Meantime, the Department of Trade and Industry said there are no movements yet on BNPCs.

DTI Secretary Ramon M. Lopez said the increase in fuel prices will have minimal impact on BNPCs because the relatively small percentage increase and the small oil cost percentage to total production cost.

Lopez estimated less than 3 percent or only about 3 centavos increase for every ₱15 canned sardines.

DTI Undersecretary for Consumer Welfare Ruth Castelo said, “We will study the data presented when they make a request for increase. Still no movement in prices of BNPCs until we publish an adjusted SRP Bulletin.”