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TRAIN suspension, govt transparency and regulation needed to ease OPH burden

February 28, 2019

by IBON Web Admin

Research group IBON said that the third consecutive and big-time oil price hike only makes it more urgent for the Duterte administration to stop the oil excise taxes of the Tax Reform for Acceleration and Inclusion (TRAIN). This will lessen the impact of rising oil prices on the poorest families. The group also said that government should also ensure transparency of the local oil industry and regulation so that the country is not continually left at the mercy of the global oil market.

For three consecutive weeks, local oil prices have gone up due to movements in the Mean of Platts Singapore (MOPS) and peso-dollar exchange rate. MOPS for gasoline prices has had a net increase of US$18.50 per barrel and US$22.25 per barrel for diesel, from January to February 2019. The peso meanwhile depreciated against the US dollar by Php0.59 also in the same period. The increase in global oil prices have mainly been attributed to the US sanction of Venezuela and production cuts by the Organization of Petroleum Exporting Countries (OPEC).

IBON said that besides rising global oil prices and foreign exchange, the fuel excises under TRAIN are a significant factor behind local oil price hikes. Since the implementation of TRAIN last year, the price per liter in Metro Manila of diesel has increased by Php8.54, of gasoline by an average of Php7.19 and of kerosene by Php6.42.

The pump price of diesel in the last week of February 2019 is Php43.44 per liter, of gasoline Php52.69, and of kerosene Php51.09. These would be much lower if not for TRAIN’s new and additional oil excise taxes.

If there were only the movements in global oil prices and the peso-dollar exchange rate, diesel would only be a much cheaper Php38.40 per liter and gasoline only an average of Php Php48.60 per liter. TRAIN adds Php3.50 per liter to the price of diesel and Php3.10 to the price of gasoline. TRAIN’s additional excise taxes and the value-added tax (VAT) on petroleum products makes fuel more expensive in addition to the adverse movements in global prices and foreign exchange, said the group. To date since the implementation of TRAIN last year, 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.

IBON said that poor Filipino households have mainly borne the brunt of consumption taxes under TRAIN which drove up inflation at the start of 2018. IBON estimates that this has eroded the income of the poorest 60% of households by anywhere between Php3,300 to Php7,300 in 2018. Filipino commuters may also soon pay higher jeepney fares as transport groups demand that fares be increased to Php10 due to the consecutive oil price hikes.

IBON said that the government is not totally helpless with regard to rising oil prices and that it could lessen the burden of the poorest Filipino families if it wants to. It could suspend in the short term the new excise taxes imposed under TRAIN to bring fuel prices down. It could also push for transparency by unbundling fuel prices to check for profiteering and by demanding fuel inventory data from oil companies. Government should also in the long term revive its regulating powers over the oil industry which it gave up under the Oil Deregulation Law of 1998, said the group. ###