Despite the decline in oil prices to $70 per barrel, economists said local fuel prices and transport fares may not go down anytime soon.
Brent crude, the benchmark for more than half of the world’s oil, lost 13 percent last week to $70.15 a barrel, the lowest since May 2010, according to Bloomberg.
University of Asia and the Pacific School of Economics Vice Dean Cid Terosa said this would not immediately translate into lower fuel prices.
“We can expect the impact to be immediate but, since prices are sticky downward and business can take advantage of seasonal demand, the impact of lower oil prices may not be felt soon,” Terosa said.
“Also, the market is waiting for signs of sustained decrease in petroleum prices before cutting back prices of goods and services,” he added.
But lower fuel prices would not automatically mean lower transport costs as fares are regulated by the government, according to University of the Philippines economist and former Budget Secretary Benjamin E. Diokno.
Diokno also said the Land Transportation Franchising and Regulatory Board adjusts transport fares based on Dubai crude oil prices, not Brent crude.
In the meantime, Diokno said the “biggest loser” in the decline in oil prices will be the government, because taxes on oil and oil products will also decline. The Bureau of Internal Revenue (BIR) collects excise taxes from oil importers. An excise tax is imposed on the production, sale or consumption of a commodity in a country.
The highest excise tax on petroleum products that is collected by the government is for lead premium gasoline at P5.35 per liter. Excise tax collected from the sale of unleaded premium gasoline is at
“Transport fares have to decline soon. Sadly, it would need the approval from government regulators. We should have a system where transport fares adjust automatically with oil price adjustments,” Diokno said.
Last week Socioeconomic Planning Secretary Arsenio M. Balisacan said the downward trend in international prices mineral fuels and lubricants presents a “unique opportunity” to acquire future oil contracts.
Balisacan said low prices allowed the country to increase its fuel imports by 33 percent, to $1.3 billion in September, from $978.1 million posted in the same month last year.
Between January to September 2014, the country’s import of petroleum products grew 6.1 percent, to $10.61 billion in 2014, from $10 billion recorded a year ago.
Half of this amount or around $5.1 billion were allocated for petroleum crude imports in the nine months to September. This is 3 percent higher than the $4.95 billion posted in the same period last year. – by Cai Ordinario