Oil Price Hikes May Cause 'Inflation Explosion', Philippine Groups Warn

(MENAFN- Khaleej Times) [Editor’s Note: Follow Khaleej Times live blog amid US-Israel-Iran war for the latest regional developments.]

With the price of diesel projected to go up to ₱80/ litre (Dh5.20) in the Philippines, progressive groups warned the country is facing an impending“inflation explosion” brought about by the ongoing US-Israel-Iran war.

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Prices of food, services, utilities, and other basic commodities will go up following hikes in the prices of petroleum products that are expected in the next few days. The ‘oil price shocks’ are caused by US-Israel-Iran war that in turn instigates“major uncertainties in the global oil market,” putting tremendous pressure on import-dependent, oil-intensive economies like the Philippines, noted the group Bagong Alyansang Makabayan (Bayan).

With a projected ₱18/litre (Dh1.15) increase in diesel and ₱7/litre (45 fils) in gasoline prices starting Tuesday, Bayan demanded the removal of value-added and excise taxes on petroleum products, warning of runaway inflation should President Ferdinand Marcos Jr. fail to swiftly act against oil price increases.

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The Philippine government imposes an additional 12 per cent value-added tax (VAT) on many products and services, including oil products. Bayan asserted its removal will protect Filipinos from the far-reaching effects of the conflict in the Middle East.

Bayan pointed out the temporary removal of taxes on oil products has a legal basis in the Tax Reform for Acceleration and Inclusion (Train) Act when imported oil reaches a certain level.

After 10 consecutive weekly price hikes, even before the US and Israel ignited another war in the world’s biggest energy-exporting region, the per-litre prices of gasoline, diesel, and kerosene already rose by ₱6.70, ₱9.40, and ₱7.70, respectively.

Current pump prices are at ₱65.65/litre for gasoline, ₱62.10/litre for diesel and ₱75/litre for kerosene.

Removing both the excise tax and VAT would lead to an estimated total reduction of approximately ₱16–₱18 per litre for gasoline and ₱12–₱13 per litre for diesel.

Early this week, Senator Francis Escudero called for amendments to both tax measures to allow Marcos to suspend or lower excise and VAT on fuel whenever global prices exceed benchmark assumptions for Dubai crude.

“The law should be amended to automatically give the President that power to suspend or lower excise and VAT rates when prices exceed the estimated range of Dubai crude oil," he said.

Escudero’s proposal came as Marcos himself said he was in talks with lawmakers in both houses of Congress for an authority to reduce taxes should Dubai crude exceed $80 (Dh294) a barrel.

** ‘Scary prospects’**

Mary Zapata, president of the Confederation of Truckers Associations of the Philippines, said a prolonged conflict in the Middle East scares transportation players.

She admitted that they are already thinking of asking their clients for service fee increases inasmuch as the government does not have a fuel subsidy plan for their business.

Zapata warned that several trucking companies may stop operations in case of runaway oil price hikes, which in turn may cause jobs among industry workers.

It may also lead to further inflation in the prices of commodities due to disruptions in supply delivery.

Zapata’s warning was echoed by provincial bus operators who said they have petitioned the transportation authorities for fare increases, along with jeepney and city buses operators.

Alex Yague of the Provincial Bus Operators Association of the Philippines said they are asking for ₱.50 increase for every kilometre.

The Land Transportation Franchising and Regulatory Board (LTFRB), meanwhile, said an across-the-board fare hike is a possibility, including those offering point-to-point or P2P transport, airport taxis and app-based ride-hailing services.

LTFRB chief Vigor Mendoza said there are active petitions for permanent fare increases of ₱2 for jeepneys and city buses, 50 centavos per kilometer for provincial buses, and an increase of 30 to 40 per cent for point-to-point (P2P) services.

The agency also said that the roll out for fuel subsidy for public transport may be implemented by April.

Meanwhile, the Federation of Free Workers have suggested a four-day work week to offset the projected increase in fare hikes, a suggestion immediately opposed by businessmen.

The Employers’ Confederation of the Philippines (ECOP) said such suggestions need careful study as there is no one-size-fits-all solution to the crisis.

ECOP’s Sergio Ortiz Ruiz said small businesses may not be able to cope with such suggestions, leading to loss of jobs.

The country’s most militant labor federation said a pro-labor solution is what Filipino workers need during the crisis, such as a P1,200 minimum daily living wage hike for workers.

Kilusang Mayo Uno said it supports demands for the removal of excise and value-added imposition on oil products.

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