Amendments to control fuel prices win support in House


By Russell Louis C. Ku

THE CHAIRMAN of the House Energy Committee said that he supports a Department of Energy (DoE) proposal to amend the oil deregulation law by introducing checks on the industry’s ability to charge high prices during crises.

“I have long pushed for a special mechanism to prevent overpricing in emergency situations. The Oil Deregulation Law does not give oil companies blanket authority to take advantage of consumers,” Pampanga Rep. Juan Miguel M. Arroyo said in a statement.

The DoE has asked Congress to amend the oil deregulation law to allow the government to intervene in the event of prolonged increases in the retail price of and to require the unbundling of retail fuel costs.

Mr. Arroyo said retail prices also reflect the industry’s cost of storage and marketing, which he also blamed for higher prices.

He said by telephone that he would hold a committee hearing this week to discuss amendments and consider the suspension of the excise tax, summoning officials from the DoE and Department of Finance (DoF).

The oil industry was deregulated through Republic Act 8479 or the Downstream Oil Industry Deregulation Act of 1998 to encourage competition and investment in the industry.

Energy officials have also submitted a letter to the Presidential Legislative Liaison Office to ask President Rodrigo R. Duterte to certify the amendments to the oil deregulation law as urgent. Congress will resume plenary session on Nov. 8.

According to a think tank, the suspension of taxes on fuel products would result in at least a 20% price decrease, which could help cushion the public impact of volatility in the international oil market.

Terry Ridon, convenor of Infrawatch PH, proposed that Mr. Duterte consider suspending the value-added tax and excise fees on petroleum products to address rising oil prices.

“With this volatile price environment, the public cannot wait for new legislation to address problems requiring urgent solutions,” he said in a policy paper.

The suspension of oil taxes would lead to a decline in the price of gasoline by P17.5 or 25% to P52.5/L while diesel costs would fall by P11.35 or 22.7% to P38.65, according to Mr. Ridon.

He said that these estimates are based on the assumption of pump prices for diesel and gasoline of around P50 and P70 per liter (/L) respectively.

“This affords the public the space to prepare for graduated price adjustments in the event the suspension is lifted, when new fiscal measures are implemented to more adequately respond to price volatility in the international oil market while balancing revenue and public impact,” Mr. Ridon said.

However, the DoF has warned that the suspension of excise tax would result in as much as P131.4 billion in foregone revenue for 2022, which could affect the management of the economic recovery.

Mr. Ridon said by chat message that the suspension of taxes should only be short term until the price of crude oil “reverts an average price of around $70 per barrel.”

He also called on the government to reduce discretionary spending such as confidential and intelligence expenses, which need to be diverted to the pandemic containment effort while fuel taxes are suspended.

IBON Foundation said Saturday that suspending the excise tax will immediately lower the pump price of diesel and gasoline by P6.72 and P6.33 (/L).

It said government revenue lost can be offset by a suspension of corporate income tax cuts under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law.

CREATE, signed on March 26, effectively reduced the corporate income tax rate to 25% for large corporations and 20% for small to medium businesses with net taxable income not exceeding P5 million, and total assets, excluding land, not exceeding P100 million starting July 2020.

“The group noted that the government projects revenue losses of P115.8 billion in 2021 and P101.8 billion in 2022 from CREATE’s corporate income tax cuts,” IBON said in a statement.

Energy Secretary Alfonso G. Cusi said rising in oil prices are due to the sudden increase in demand due to a surge in economic activity in other countries, a production slowdown, stockpiling ahead of winter, and international sanctions on Iran and Venezuela.

As of Oct. 19, pump prices for gasoline and diesel have increased by P19.65/L and P18/L respectively year to date, according to the DoE.

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