MANILA, Philippines — The Department of Energy on Tuesday said it supports a further hike in excise tax on fuel products scheduled in January 2019, adding that global oil prices will likely tumble next year.
President Rodrigo Duterte’s economic managers last week called off their previous plan to suspend the next round of oil tax increase next year, citing the recent drop in world crude prices.
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At a forum in Taguig City, Energy Secretary Alfonso Cusi said the DOE forecasts price of Asian benchmark Dubai crude to slide to around $50 per barrel in the next months.
“That supports the recommendation of the Department of Budget and Management and Department of Finance to reinstate the [fuel] excise tax,” Cusi was quoted as saying in a GMA News Online report.
Inflation clocked in at 6.7 percent in September and October, the fastest pace in nearly a decade. To combat surging prices, Duterte decided last month to defer the second tranche of the fuel tax hike in addition to measures announced to lower food prices.
READ: Malacañang approves oil tax hike suspension
Under the Tax Reform for Acceleration and Inclusion Act, or TRAIN law, the increases in petroleum taxes will be automatically suspended should average price of Dubai crude reach $80 per barrel for three consecutive months before the next round of tax hike.
The Cabinet-level Development Budget Coordination Committee said it took into consideration the suspension’s adverse impact on government revenues and expenditures. The DBCC will discuss its recommendation during a Cabinet meeting also on Tuesday.
“The recommendation comes in light of the favorable outlook in world oil prices, where the Dubai crude oil prices have gone down by 14 percent from an average of $79 per barrel in October down to $68 per barrel so far in November,” the DBCC said.
“More so, the oil futures market projects the price of oil to decline further to below $60 per barrel in 2019, indicating a downward trend in world oil prices,” it added.
The DOF estimated that postponing the additional excise taxes on fuel in entire 2019 could result in foregone revenues of P43.4 billion and would prompt the government to reduce spending to avoid breaching its budget cap for next year.
In the same energy forum, Cusi said Qatar’s surprise move to leave the Organization of Petroleum Exporting Countries, or OPEC, next month to focus on gas production could lower oil prices.
Doha accounts for only around two percent of OPEC output.
“Qatar will be acting more independently. Hopefully, that would increase their production and increase the supply in the world market,” the Energy chief said.
Focus is now on a meeting of OPEC and non-OPEC members in Vienna at the weekend, where they will reveal how much and for how long they will reduce as they look to stabilise the crude market. — Ian Nicolas Cigaral with AFP