Same oil story: A continuing fluctuation of gas prices

Multiple factors contribute to the continuous up and down cycle of oil prices in the Philippines experienced in the first half of 2019. Reasons that affect, either increased or decreased oil prices are significantly many, and may include the supply and demand, production stability of big oil producing countries, trade tensions among the largest oil consumers, and even the week-by-week appreciation or depreciation of the value of Philippine Peso against the US dollar.

A big factor of this year’s oil price changes is the second tranche of the Tax Reform for Acceleration and Inclusion Act, or TRAIN 2. As mandated under the TRAIN law, which imposed new taxes, President Duterte in December 2018 gave his go-ahead to implement the scheduled higher fuel excise in 2019 as global crude prices slid in previous months. The second tranche of oil excise tax hike took effect on Jan. 1 this year.

Per the law, an excise of P2.50 per liter was slapped on diesel and bunker fuel in 2018. This will go up to P4.50 this year, and P6 in 2020.

The excise on gasoline also increased from P4.35 per liter, to P7 in 2018, and then to P9 this year, and P10 in 2020.

On Feb. 26, gasoline and diesel prices went up by P1.45 per liter, while a liter of kerosene increased by P1.35. The cumulative fuel price increases in February alone were P6 per liter for diesel, P5 per liter for gasoline, and P4 to P5 per liter for kerosene.

On import and export, according to the Department of Energy (DOE), demand in the Philippines for petroleum products reached 168.8 million barrels last year, from 166.5 million barrels in the previous year. These are equivalent to 462,500 barrels daily in 2018, compared to 456,300 barrels daily in 2017.

Diesel, which accounted for 42 percent of domestic demand, showed a 3.2-percent rise in volume.

Demand for gasoline—24 percent of total—increased by 3 percent, while that for liquefied petroleum gas used for cooking—accounting for 10 percent of total demand—went up by 10 percent.

The DOE said the Philippines incurred a bill of $13.5 billion, or about P707 billion, on petroleum products imported in 2018, revving up by 32 percent from $10.3 billion in 2017.

This was due to the combined effects of higher import cost and increased import volume of crude oil, the DOE said.

Crude oil, which accounted for 55 percent of imports, billed at $6.2 billion last year, up 42 percent from $4.3 billion previously.

On the second week of July, pump prices of gasoline went up for the fifth week straight, as global prices spiked after a storm in the Atlantic Ocean shut down many refineries in the Gulf of Mexico, paring down oil supply.

Petron, Shell, Seaoil, Phoenix, PTT Philippines and Eastern announced price hikes of P1.05 per liter of gasoline, and 70 centavos per liter of diesel,
effective 6 a.m. of July 16.

Petron, Shell and Seaoil also raised the prices of kerosene by 70 centavos per liter.

The price of Dubai crude oil climbed to $64.62 per barrel on July 10, from $61.65 per barrel on July 3.

Sources: Inquirer Archives, PIA