By Ronnel W. Domingo, October 2 2018; Philippine Daily Inquirer
Image Credit to Philippine Daily Inquirer
Pump prices of oil products went up for the eighth time in as many weeks, increasing by up to P1.35 a liter on Tuesday, the biggest jump over the past two months that pushed fuel prices to their highest levels in a decade.
The latest round of fuel price increases could further fan the fires of inflation, which rose to 6.4 percent in August, a nine-year high that helped pull down the ratings of President Rodrigo Duterte.
Eleazar Medevilla, who has been a taxi driver for 16 years, could only shake his head when asked about fuel prices. “Well, it’s really high,” he said.
As a result, Medevilla said, his income had significantly decreased.
“For example, an out-of-town trip used to cost me about P1,000. Now, it’s P1,500,” the driver of Denmark taxi said.
Eroded take-home pay
Told about the hefty increase in the retail price of diesel, Edward Gallardo of Marilao town, Bulacan province, said the increase would further erode his net daily take from ferrying in his van employees of a company in Makati City after office hours.
He said his net pay had gone down to about P400 because of rising fuel prices.
Starting at 6 a.m. on Tuesday, oil companies raised prices of diesel by P1.35 a liter and gasoline by P1 a liter.
As of press time, those that had announced price increases included Shell, PTT, Total, Flying V, Seaoil, Unioil, Eastern, Caltex and Phoenix.
Shell, Seaoil, Flying V and Caltex also raised prices of kerosene by P1.10 per liter.
Based on monitoring by the Department of Energy (DOE), the price of diesel in Metro Manila now ranges from P45.65 to P50.39 a liter.
A liter of gasoline with an octane rating of 95 is now retailed at P53.05 to P63.27 a liter. Kerosene now sells for P49.82 to P59.95 a liter.
So far this year, prices of diesel have gone up 28 times but have gone down 11 times, resulting in a net increase of P13.50 a liter.
Prices of gasoline have risen 29 times but have gone down only 10 times for a net increase of P13.37 a liter.
Kerosene prices have jumped 26 times but have decreased 11 times for a net increase of P12.71 per liter.
LPG prices up
Petron announced that it raised prices of liquefied petroleum gas (LPG), which is used for cooking, by P2.35 a kilogram.
Since Monday morning, consumers had to pay an additional P25.85 for an 11-kilo cylinder.
Eastern raised its LPG price by P2.30 a kilo, or an additional P25.30 for an 11-kilo cylinder.
Petron upped the price of its AutoLPG, widely used by taxi operators, by P1.30 a liter.
DOE data show that the price of 11 kilos of cooking gas is now between P705 and P866.
Adverse impact on poor
A P3-a-liter excise on diesel — used for the transportation of people and goods — causes inflation for the poor to increase by about 0.9 percentage point, said Dennis Mapa, dean of the School of Statistics at the University of the Philippines in Diliman, Quezon City.
Mapa said in a presentation that the effect on poor households was 10 times worse than the additional 0.09-percentage-point increase in inflation that “nonpoor” households feel.
Under the Tax Reform for Acceleration and Inclusion (TRAIN) Act, the first year of its implementation in 2018 would see an excise of P2.50 a liter slapped on diesel.
Taking into account the 12-percent value-added tax (VAT), the levy on diesel totals P2.80 a liter.
By the third year of the TRAIN law in 2020, the excise would have risen to P6 a liter or P6.72 a liter, including VAT.
Mapa said that at P6 a liter, the tax on diesel added 1.8 percentage points to inflation felt by the poor.
This is 10 times worse than the 0.18 percentage point added to the burden on nonpoor households.
The TRAIN law, which took effect on Jan. 1, raised or slapped excise on such goods as fuel, motor vehicles and sweetened beverages to compensate for an increase in the cap on tax-free income tax.
The Department of Finance earlier expected inflation in September to be 6.4 percent year on year.
But the consensus forecast for inflation in September is higher at 6.9 percent, according to Bloomberg.
The rising inflation was partly due to soaring food prices, especially rice, largely as a result of the depleted rice buffer of the National Food Authority.
Rising interest rates
The unabated price increases come as interest rates are rising.
The Bangko Sentral ng Pilipinas has so far raised its key interest rate by a total of 150 basis points, or 1.5 percentage points this year, in hopes of reining in inflation.
The higher interest rates make borrowing money costly, thereby reducing the volume of money in circulation.
Fewer pesos chasing goods has the effect of easing the pressure on inflation.
A weakening peso against the US dollar does not help temper increases in the price of crude oil, which the country imports from the Middle East.
The decision of the Organization of Petroleum Exporting Countries (Opec) not to increase production has sent crude oil prices further upward.
With Saudi Arabia—the largest oil producer among Opec members—not spelling out a clear plan about an increase in output amid dwindling exports from Iran, some analysts said crude prices returning to at least $100 was possible.
Iran faces sanctions from the United States come November.
The benchmark Brent (European market) hit $82.83 per barrel on Monday while West Texas Intermediate (North America) reached $73.29 per barrel.
The bellwether for Asia, Dubai crude, reached $77.22 per barrel after dipping to $45.89 in July 2017.
Malacañang has acknowledged that rising inflation caused the double-digit plunge in Mr. Duterte’s approval and trust ratings early last month.
People’s disapproval of how the administration is handling the soaring prices of basic goods and services has jumped 22 points to 51 percent, according to results of a survey conducted in early September. —With a report from Aie Balagtas See