Oil companies in the Philippines will implement a big-time fuel price hike this week, as the United States-Iran conflict drives volatility in the global market.

Department of Energy (DOE) Secretary Sharon Garin said during a House committee hearing on Monday, March 9, that this is the “highest jump” in fuel prices in history, although oil firms intend to stagger the price increase of up to P24 in the coming week.

Malacañang has said President Ferdinand Marcos Jr. plans to ask Congress to grant him temporary powers to suspend the excise tax on fuel. The chief executive needs to get the permission from the legislative, which has sole taxation powers, and which crafted the law that set fixed excise taxes on petroleum products.

Since last week, numerous bills have been filed seeking a temporary suspension or reduction of fuel excise tax, or granting the President the authority to do it on his own. Marikina 2nd District Representative Miro Quimbo, who presided over Monday’s ways and means committee hearing, proposed the latter.

“The issue of fuel prices is more than a matter of global markets or international conflicts. It is first and foremost a matter that affects the everyday life of every Filipino people, especially those in the working class and the poorest of the poor,” he said during Monday’s meeting.

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What happens if the fuel excise tax is suspended?

A suspension will definitely curb, but not totally offset, the impact of the big-time oil price hike.

The following are the fixed excise taxes on petroleum products, based on Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law:

• Gasoline: P10 per liter
• Diesel: P6 per liter
• Kerosene: P5 per liter

Out of the three, diesel accounts for the largest share of fuel consumption in the transportation sector. A big-time price jump will extremely burden the lower-income class.

“This could help. P6 is a substantial decrease,” Garin said of a potential suspension of excise tax on diesel.

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Department of Economy, Planning, and Development (DEPDev) Undersecretary Rosemarie Edillon also said that suspension of the excise tax would dampen inflation, and restore some purchasing power.

DEPDev lists two scenarios. Under scenario 1, global oil prices remain above the $80 threshold (or an average of $98 per barrel) until May before it declines. Under scenario 2, the prices will soar to $140 per barrel in the event that the Strait of Hormuz — a crucial shipping route for 20% of the world’s oil and gas — remains closed after May.

• Scenario 1: Barrel price of Dubai crude rises to $9
  • Impact on diesel prices: P74.22 per liter (without suspension), P67.50 (with suspension)
  • Impact on full-year inflation: Projected to be between 4% and 4.2% (without suspension); projected to be between 3.9% to 4.1% (with suspension)
  • Impact on purchasing power: Reduced by about P1 per P100 (without suspension); reduced by about P0.15 per P100 (with suspension)
• Scenario 2: Barrel price of Dubai crude rises to $140
  • Impact on diesel prices: P96.76 per liter (without suspension), P90.04 (with suspension)
  • Impact on full-year inflation: Projected to be between 4.5% to 4.8% (without suspension), projected to be between 4% to 4.3% (with suspension)
  • Impact on purchasing power: Reduced by about P2.60 per P100 (without suspension); reduced by about P1.80 per P100 (with suspension)

Department of Trade and Industry Undersecretary Mary Jean Pacheco said the agency supports the suspension to soften the impact of the big-time price hike on the logistics cost for truckers, shipping lines, and warehousing, which would “ultimately redound to the prices of consumer goods.”

Assistant Secretary Regino Mallari of DTI’s Fair Trade Group added that manufacturers of basic necessities and prime commodities have not requested an increase in suggested retail prices as they still have a month or two to exhaust their current inventories.

Department of Finance Undersecretary Karlo Adriano said the DOF is eyeing a system that reduces the excise tax on fuel products when global oil prices cross a threshold.

With the government estimated to lose P136 billion in revenue from May to December if the excise tax will be suspended, Adriano said the agency’s proposal “seeks to protect the Filipino people from extraordinary fuel price shocks while preserving fiscal prudence and integrity of the country’s revenue system.” – Rappler.com