Diesel price rollback seen at PHP 20 per liter

Motorists are finally getting a much-needed break after weeks of hefty increases, as the Department of Energy expects pump price rollbacks, with diesel prices seen dropping by at least PHP 20 per liter (/l).

Energy Secretary Sharon S. Garin said that diesel prices may go down by at least PHP 20.89 per liter, gasoline by PHP 4.43 per liter, and kerosene by PHP 8.50 per liter starting Tuesday, April 14.

“It’s based on the average of the last five days of international prices and comparing that to the average of the previous week,” she wrote in a Facebook post on Sunday.

Ms. Garin said that while not all gas stations have the same pump prices, the projected rollback represents the minimum expected reduction.

If realized, this would be the first rollback in diesel prices this year.  This could pull down diesel prices to around PHP 150 per liter.

The Iran war, now in its second month, has sent global oil prices soaring and has disrupted oil supply chains. The Philippines, a net oil importer, is facing heightened price pressures amid volatility in the global markets.

Industry sources earlier said global oil prices declined after US and Iran agreed to a ceasefire to end the nearly six-week war.

While this offers temporary relief, analysts warned that volatility and uncertainty are likely to persist as de-escalation remains unclear.

The US and Iran failed to reach an agreement to end their war despite marathon talks that concluded on Sunday in the Pakistani capital Islamabad, jeopardizing a fragile ceasefire.

Each side blamed the other for the failure of the 21-hour negotiations to end fighting that has killed thousands and sent global oil prices soaring since it began over six weeks ago.

Traffic through the Strait of Hormuz, which is used to transit one-fifth of global oil and gas supply, remains at a fraction of prewar levels, according to Reuters.

“Without the reopening of the Strait of Hormuz and credible assurances that commercial vessels can transit safely, global oil flows are unlikely to see meaningful improvement,” Jun Hao Ng, assistant economist for Asia Macro at Oxford Economics, told BusinessWorld.

He added that disagreements and uncertainty surrounding the ceasefire are emerging, heightening concerns about continued disruptions.

Meanwhile, consumers may also expect further reduction in pump prices if President Ferdinand R. Marcos, Jr. will exercise his power to suspend the excise tax on fuel.

Signed on March 25, Republic Act No. 12316 grants the President the authority to suspend or reduce excise taxes on petroleum products. The law takes effect on April 13.

A suspension of fuel excise tax collection could lower pump prices by PHP 6 per liter for diesel and PHP 10 per liter for gasoline.

Jose Enrique “Sonny” A. Africa, executive director at think tank IBON Foundation, said fuel excise tax suspension will give immediate relief to around 21 million low-income households.

“The majority poor and vulnerable Filipinos will get the full relief from cutting oil excise taxes if producers pass through the relief they feel in the prices they charge, which will be better ensured if the government takes the crisis more seriously and declares a real state of national emergency to trigger price controls under the Price Act,” Mr. Africa told BusinessWorld.

He said fuel excise tax should be suspended for good, as oil taxes are regressive and do little to significantly reduce fuel consumption.

“Revenues are better generated with more progressive direct income and wealth taxes, and oil overdependence is better reduced by expanding public mass transport, promoting EVs (electric vehicles), and especially increasing public investment in renewables,” Mr. Africa said. — Sheldeen Joy Talavera, Reporter with reports from Reuters