Filipino consumers will need to swallow a ‘very bitter pill’ when it comes to their fuel expenses this week, as the price of diesel products will be on historic astronomical rise of P13.15 per liter, as announced by the oil companies.
Gasoline prices will also be increased by P7.10 per liter, while kerosene prices, a key commodity for critical industries, including aviation, will drastically climb by P10.50 per liter.
As of press time, the oil companies that already announced their price hikes effective Tuesday, March 15, include Pilipinas Shell Petroleum Corporation; Chevron Philippines, which is retailing Caltex brand at its stations and Cleanfuel. Their industry rivals are still waiting for the price trends of other companies - especially the cost adjustments to be enforced by industry leader Petron Corporation.
The price upticks at the domestic pumps could be attributed to the wild rally in prices in the world market last week – as international benchmark Brent crude surged to as high as $131 per barrel; while Dubai crude, which is a reference pricing for Asian markets, surged to $122 per barrel because of the niggling Ukraine-Russia war.
For this week, prices have been steady at softer level of $110 per barrel for Brent crude, and Dubai was still hovering also above $110 per barrel – fundamentally declining from last week’s record spikes since 2014.
Given the anticipated surge in pump prices this week, Energy Secretary Alfonso G. Cusi indicated that they pleaded to the oil firms “to take a cut, reduce their industry take,” which essentially entails that they must strive for lower margins in their products’ pricing.
He said the Department of Energy (DOE) is “reviewing the pricing mechanism,” with him emphasizing that the cost components are being fleshed out across the value chain “so we can see where we can potentially reduce prices or how we can minimize the increase.”
The energy chief similarly disclosed that President Rodrigo Duterte was calling for a meeting Tuesday, March 15. "We’re going to discuss with DOF (Department of Finance) that we are asking for the deferment or suspension of the excise tax.”
The stand of the DOE on the excise tax suspension is aligned with the wishes of the players in the oil sector, although the other major weight to muster in that tug-of-war is the finance department.
Fernando L. Martinez, chairman of the Independent Philippine Petroleum Companies Association (IPPCA), sounded off that if the excise taxes will be immediately suspended, the heavy blow of this week’s big-time hikes could be diffused – because that will entail cost reduction of P10 per liter for gasoline; and P6 per liter for diesel products.
“It means to say, the price increases due for implementation on Tuesday, March 15, will be mitigated, so there’s no need to explore for alternative measures,” he noted.
Martinez added the oil firms are supporting “the targeted subsidy to jeepney drivers, bus operators as well as for the fishermen, because the government can also cut its expenses with that – and the P5.0 billion subsidy can be easily recovered with VAT (value added tax) collections.”
He explained that when the Expanded VAT Law enforcing 12 percent tax rate on petroleum products was enacted in 2005, “the product cost as basis then was just at P25 landed cost; but now, our pump prices are at P60 to P65 per liter, so with higher VAT collections, there is now a leeway to suspend the excise taxes because with higher prices, the government will also have higher VAT collections.”