The Energy Department said it is supporting the recommendation of the Finance Department for the continued implementation of the second tranche of excise tax increase on petroleum products under Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion law.
“Next week, we expect another rollback and the DOF made a recommendation for the second tranche to be reinstated so we made our forecast for oil,” Energy Secretary Alfonso Cusi said at the sidelines of the Energy Investment Forum Tuesday.
Pump prices have declined for the eighth consecutive week amid a supply glut in the world market.
“We are seeing Dubai crude oil to be around the low $50 [per barrel] in the coming months. We have submitted our position already alongside the forecast. The excise tax will proceed because the country will really need to build infrastructures, so we need the funds,” Cusi said.
Cusi said the agency’s forecast supported the recommendation of the interagency Development Budget Coordination Committee last week.
Finance Secretary Carlos Dominguez III earlier said the DBCC decision followed the favorable outlook in world oil prices, as the cost of Dubai crude oil prices declined 14 percent from an average of $79 per barrel in October to $68 a barrel in November. Alena Mae S. Flores
Under the Train law, the government imposed an excise tax of P2.50 a liter on diesel and bunker fuel starting January this year. The rate will go up to P4.50 in 2019 and P6 in 2020.
The law provides that the increase in petroleum taxes will be automatically postponed if the average price of Dubai crude―used as benchmark for Asia― reaches $80 per barrel for three consecutive months before the next round of tax hike.
Dubai crude price, however, fell from its October peak and is now below $70 a barrel. The oil futures market expects the price of oil to further decline to below $60 per barrel in 2019, indicating a downward trend on world oil prices, according to Dominguez.
Cusi, meanwhile, said Qatar’s decision to leave the Organization of Petroleum Exporting Countries would have an impact on oil prices globally.
“Qatar will be acting more independently and hopefully that would increase their production and increase the supply in the world market.If there will be more supply, then the price would go down,” Cusi said.
Cusi also said the planned Opec-Russia production cut might not have much impact on supply.
“As of now, the forecast is that the world supply is something at 100 million barrels per day and demand is the low 98 [million] to 99 million, so there is a buffer and it is projected that the US will be increasing its production. So if the US will be able to cover for the production cut of Saudi Arabia and Russia, it will be okay,” Cusi said.