DoE: Oil prices unlikely to drop anytime soon

The country’s Energy chief does not expect oil prices to immediately rebound from recent sharp increases, citing extensive damage to energy infrastructure in the Middle East.

“This war has been ongoing for four weeks now. There is a permanent damage in the structure of the international oil community,” Department of Energy (DoE)Secretary Sharon S. Garin told a virtual press briefing on Tuesday.

Even if the Strait of Hormuz, one of the world’s most critical oil chokepoints, is cleared for hundreds of vessels to pass-through, Ms. Garin said energy infrastructure in some Middle East countries has been destroyed and could take about months or even years to rebuild.

“The speed of the increase in pump prices will not be the same as the drop in prices. In fact, it will be way, way slower because the damage caused goes beyond the war,” she said in mixed Filipino and English.

Since the outbreak of the US-Israel attack on Iran on Feb. 28, diesel prices have surged by a cumulative PHP 100.05 per liter, while prices of gasoline and kerosene have gone up by about PHP 52.30 and PHP 82.40 per liter, respectively.

Ms. Garin said these are the “fastest and the highest increase of our oil prices,” which is due to the Middle East war.

Before the Iran war, domestic pump prices ranged from PHP 49-PHP 77.03 per liter for gasoline, PHP 48-PHP 73.61 per liter for diesel, and PHP 77.40-PHP 98.89 per liter.

To cushion the impact of oil prices on motorists, the Philippines has moved to allow the President to suspend or cut fuel excise.

In the Philippines, petroleum products are subject to both fuel excise tax and value-added tax (VAT).

Under Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion law, excise taxes are imposed at fixed rates per liter — PHP 8 for gasoline, PHP 6 for diesel, and PHP 4 for kerosene.

On top of this, a 12% VAT is also applied to the total selling price, including the excise tax.

According to the Energy chief, the impact of potential reduction in excise taxes on fuel products may not be immediately felt by consumers as excise taxes have already been imposed on the country’s current fuel inventory.

“This is something that they (economic managers) are studying because even if you announce an excise tax suspension today, it will not be felt yet. The excise taxes were paid on purchases that have already been made. We’ve already stocked up. We were making sure that we have enough supply to maintain energy security,” Ms. Garin said.

At present, the Philippines has a supply of petroleum products that is good for 50.42 days.

As of April 3, the country’s inventory of gasoline could last 59.78 days, diesel for 46.93 days, and kerosene for 107.88 days. Meanwhile, jet fuel inventory is equivalent to 62.69 days, while liquefied petroleum gas or LPG is 34.02 days.

To boost the country’s oil buffer, the government has decided to procure two million barrels of diesel via state-run Philippine National Oil Co. (PNOC), with an allotted budget of PHP 20 billion.

The first shipment containing 142,000 barrels of oil from Japan arrived on March 26.

Another shipment with 300,000 barrels from Malaysia will arrive by April 10, according to Energy Undersecretary Alessandro O. Sales. The remaining 600,000 barrels will reach the country’s shores later this month.

“PNOC is still working on it week on week to procure more and more. While we have ordered, we continue to consume. We continue to use our fuel and then so while we consume or we use our fuel, we need to replenish,” Ms. Garin said. — Sheldeen Joy Talavera, Reporter