House Ways and Means Committee chairman, Albay Rep. Joey Sarte Salceda proposes a five-point plan to help curb the impact of spiraling oil prices following Russia’s recent invasion of Ukraine, as he warned that crude oil could hit $130 per barrel if the conflict persists.
The Philippines’ “immediate and important concerns” are inflation and economic growth, but the country can’t have “good results in both if oil prices are unbearably high at the pump,” said Salceda, a noted economist.
If crude oil prices remain at US$100 by March 15, Salceda said President Rodrigo Duterte should call for a special session of Congress to consider options for the reduction or suspension of the fuel excise taxes under the Tax Reform for Acceleration and Inclusion (TRAIN) law. Russia accounts for 12 percent of global oil and 24% of natural gas production, he noted.
“Although it is not very likely that Russian oil exports will be severely restrained, still expect some near-term oil price hikes at the very least,” Salceda warned, distressing that government action is needed to mitigate the effect of world crude prices in the country.
“The most fiscally sensible option is, at the very least, to reduce the oil excise tax at a level that is equivalent to what we will gain in VAT to prevent the government from going further into already elevated deficit levels,” he explained.
Salceda’s proposal will result in a P2.06-per-liter reduction in gasoline prices, P2.34 in diesel prices, and P2.89 in kerosene prices.
“Second, the government should open all public transportation options to full capacity immediately. This will help lower transport costs for those who are forced to take private cars due to the lack of available alternatives after the COVID-19 restrictions. It will also lower our consumption of fuel,” he added.
Third, the solon said, Duterte should immediately issue an Executive Order mandating the Department of Energy, the Department of Trade and Industry, and the Philippine Competition Commission to strictly monitor energy companies to prevent uncompetitive practices and hoarding in the sector.
“To ensure that no maintenance issues will exacerbate the likely impact of oil price hikes on electricity costs, I also recommend that the EO should mandate the DOE to require inspections and maintenance checks on all generation plants. In July 2021, maintenance issues worsened the effect of oil prices on electricity prices,” he further added.
Salceda also recommends using the Contingency Fund which amounts to about P4.5 billion; the President’s Socio-Civic Fund, P3 billion; and the P1 billion fuel voucher subsidy for public utility vehicle (PUV) drivers; and allowing conditional state of calamity declarations in localities especially dependent on fuel, like fishing communities.
He explained that the declaration of a state of calamity for economic reasons should be allowed when oil prices become unmanageable to allow local government units to use their calamity funds for fuel vouchers and other mitigating measures.
“We can’t risk too-little, too-late interventions at this stage of our economic recovery. Of course, fiscal stability is a goal we must keep, but the immediately important concerns now are inflation and economic growth, and we can’t have good results in both if oil prices are unbearably high at the pump,” he stressed.
Regarded as the House resident economist, Salceda warned that world crude prices could soar if the conflict continues and the oil exports from Russia are blocked under an international sanction. As of Monday this week, the net cumulative increases in domestic fuel prices so far this year had already hit P10.85 per liter for diesel, P8.75 for gasoline and P9.55 for kerosene.