Suspend excise taxes on gasoline, diesel, kerosene and LPG  in this oil crisis

Every Filipino household is currently grappling with the harsh realities of an impending economic upheaval. The pressing questions on everyone’s mind are how to absorb the shock, preserve domestic stability, and maintain purchasing power that has already been significantly diminished.

As of yesterday, the average pump price for gasoline has reached P55.90 per liter, diesel at P53.40, and kerosene at P70.22. Just last week, the Mean of Platts Singapore trading reported staggering increases: P5.10 per liter for diesel, P3.40 for gasoline, and P4.40 for kerosene. In response, the Department of Energy convened with oil industry players to discuss staggered price hikes and potential discounts to mitigate these burdens. However, the reality is that these measures are mere band-aids on a gaping wound.

The geopolitical landscape has further complicated matters. Following the U.S. attack on Iranian nuclear facilities, Brent crude prices surged from $63 in May to $80 on the day of the strikes, before settling at $78.30. This volatility is a direct consequence of the escalating Israel-Iran conflict, now involving U.S. interests. Iran’s parliament has even voted to close the Strait of Hormuz, a critical artery for oil shipments to Asia, including the Philippines. Should this closure occur, analysts predict Brent crude could skyrocket to between $100 and $150 per barrel.

Every $10 increase in Brent crude costs us an additional $4.7 million daily. With our consumption at 471,700 barrels per day, the recent price shock has ballooned our oil import costs to $7.05 million daily, translating to a staggering P401 million per day or P146 billion annually. The prospect of Brent doubling to $150 per barrel is not just alarming; it’s catastrophic.

Meanwhile, our government is scrambling to prepare for the inevitable breach of its subsidy benchmark of $80 per barrel of Dubai crude. The Department of Energy has indicated that prices are already at $75.16 per barrel and expected to rise. This will trigger government fuel subsidies funded by contingency and socio-civic funds, but these measures are insufficient.
If the President genuinely wishes to demonstrate political will and sincerity in aiding our citizens, he must act decisively to reduce the 12 percent value-added tax (VAT) and excise taxes on gasoline (P10 per liter), diesel (P6 per liter), kerosene (P5 per liter) and LPG (P3 per kilo). Currently, the government profits P16.70 per liter of gasoline and P12.40 per liter of diesel from these taxes. It’s no wonder some sectors claim the government is the most profitable oil company in the country.

In 2022 during the outbreak of the Russia-Ukraine conflict, a proposal was made to reduce VAT and excise taxes on fuel. Albay congressman and economist Joey Salceda suggested implement a balanced VAT-excise tax reduction of P2.06 per liter in gasoline, P2.34 in diesel and P2.89 in kerosene. With a prolonged oil crisis looming, it’s time to revisit this proposal with even more substantial reductions. Additionally, the impact of rising oil prices on electricity generation cannot be overlooked. The Department of Energy must ensure rigorous monitoring of energy companies to prevent uncompetitive practices and hoarding, as seen in 2021.

Moreover, we cannot ignore the plight of the over 2.2 million overseas Filipinos working in the Middle East. Recent data indicates thousands of Filipinos in conflict zones like Israel, Iran, and Yemen. If tensions escalate, their safety and employment are at risk, further jeopardizing our economy.

Geopolitically, we are bound to be drawn into this conflict, siding with the U.S. under our 1951 Mutual Defense Treaty. This war will have far-reaching political, economic, and social implications, necessitating careful consideration from our government. The Iran-Yemen alliance may target Filipinos abroad, and even in our own Mindanao.

The question looms: will Iran risk her economic suicide by threatening and finally close the Strait of Hormuz? This strait is their lifeline for oil exports, particularly to China. Can Iran and its allies, such as Yemen and Hezbollah, effectively enforce this closure against the overwhelming military presence of the U.S. and Israel? Furthermore, will neighboring Gulf states, reliant on this strait, support such a drastic move? The global ramifications are profound, and the world watches with bated breath. The potential for this Middle Eastern conflict to escalate into World War III is real, including the possibility of China invading nearby Taiwan, and we must be prepared for the consequences that lie ahead.

In the coming days, the ramifications of this conflict will be felt acutely across our economy and diplomatic relationships. It is imperative that this administration, amidst a divided legislature, (Senate vs House of Representatives over impeachment issues) acts proactively to safeguard our citizens’ interests and contribute to global stability.

The stakes have never been higher. As the geopolitical landscape shifts, the Philippines finds itself at a critical juncture. The government must not only react to immediate crises but also anticipate long-term consequences. The crisis could lead to a catastrophic spike in oil prices, which would further cripple our economy and devastate the livelihoods of ordinary Filipinos. The government’s current approach, which relies heavily on subsidies and temporary relief measures, is inadequate in the face of such a monumental challenge.

The reality is that the Filipino people are already feeling the pinch. With rising fuel prices, the cost of living is spiraling out of control. Families are forced to make difficult choices between basic necessities such as food, education, and healthcare. The government’s failure to act decisively in reducing taxes on fuel is tantamount to turning a blind eye to the suffering of its citizens. If the President truly cares about the welfare of the people, he must prioritize their needs over revenue generation.

As we navigate these turbulent waters, it is essential for the government to engage in transparent communication with the public. The Filipino people deserve to know what measures are being taken to address these pressing issues and how they can contribute to national stability. A well-informed citizenry is crucial for fostering resilience in the face of adversity.

The challenges facing the nation are daunting, but they are not insurmountable. It is imperative that our leaders act with urgency and integrity to protect the interests of the Filipino people. The time for half-measures and reactive policies has passed; we need bold, decisive action that prioritizes the welfare of our citizens. As we stand on the brink of potential conflict and economic turmoil, let us hope this administration rises to the occasion, demonstrating the political will necessary to navigate these unprecedented challenges. The future of our nation depends on it. (end)