Fuel prices cheaper than in 2018 if not for TRAIN

February 14, 2019

by IBON Foundation

Research group IBON said that the fuel prices would be cheaper now than in 2018 without the Tax Reform for Acceleration and Inclusion (TRAIN) law. The group said that TRAIN’s additional excise taxes have prevented Filipinos from feeling the benefits of lower global oil prices. Filipinos face even higher prices with the implementation of the second tranche of fuel excise taxes this year.

IBON said that since TRAIN was implemented the price per liter in Metro Manila of diesel has increased Php4.94, of gasoline by an average of Php2.99 and of kerosene by Php6.18.

Comparing average fuel prices in end-December 2017 before TRAIN and in early February 2019 shows that pump prices have risen from Php36.35 to Php41.29 for diesel, Php47.85 to Php50.84 for every liter of gasoline, and Php41.09 to Php47.27 for kerosene, the group noted.

The price of petroleum products has been changing due to changes in the Mean of Platts Singapore (MOPS) prices and in the peso–dollar exchange rate. MOPS for gasoline prices has had a net increase of US$8.10/barrel and a net increase of US$9.21/barrel for diesel during the same period. The peso meanwhile depreciated against the US dollar by P1.89 also in the same period.

Overall movements in global oil prices and the peso-dollar exchange rate since end-2018 mean that pump prices should only be Php36.25 per liter for diesel and Php46.75 for gasoline if not for TRAIN. Diesel would be Php0.10 per liter cheaper and gasoline Php1.10 cheaper if not for TRAIN’s additional excise taxes.

IBON said that TRAIN’s additional fuel excise taxes and the VAT on these make fuel more expensive on top of adverse movements in global prices and foreign exchange. To date, Filipinos are paying an additional Php5.04 for every liter of diesel, an average of Php4.09 for every liter of gasoline, and Php4.48 for kerosene because of TRAIN.

Consumption taxes under TRAIN drove up inflation at the onset of 2018, which further strained the already low incomes of poor Filipinos. IBON estimates that this eroded the income of the poorest 60% of households by anywhere between Php3,300 to Php7,300 in 2018.

IBON said that as the 2019 midterm elections campaign begins, many Filipinos may choose to vote for candidates who will reverse the ill effects of Duterte’s TRAIN.  Candidates should include the repeal of this regressive tax reform package in their major campaign agendas. This could start with the suspension of consumption taxes on sensitive products like oil, said the group. ###