Global supply disruptions or geopolitical tensions quickly translate into higher transport and production costs in the Philippines. We are heavily dependent on imported oil, so global crude prices move closely with local diesel and gasoline prices. For instance, every US$10 increase in the Dubai benchmark raises the price of diesel by about Php7/liter and gasoline by about Php5/liter.

There is an asymmetry in price adjustments. Pump prices rise quickly when crude prices rise, but fall more slowly when global prices fall. Unfortunately, this is especially evident for diesel. Diesel is widely used for transport, freight, and agriculture, so price spikes here feed into more expensive food and other basic goods and services. Downward pass-through has been particularly weak since 2025.

The government justifies letting oil firms price as they see fit by invoking the Oil Deregulation Law (ODL) and so-called market forces. The law should be repealed and regulation strengthened, with a view towards eventual renationalization and state control of the strategic oil sector.

Scrapping oil VAT and excise taxes will immediately lower oil prices and moderate the impact on poor consumers. Subsidies for transport operators and small producers will also provide relief while helping soften prices. ###