Amid surge in global demand

BY DARWIN G. AMOJELAR Senior Reporter

THE National Economic and Development Authority (NEDA) said the government is studying a proposal from the private sector to cut tariffs on crude oil and petroleum products to zero amid the rising global demand for fuel.

“The energy sector is proposing a tariff reduction on crude oil, refined petroleum products and asphalt from the current three percent to zero,” acting Socioeconomic Planning Secretary and NEDA Director-General Augusto Santos told reporters over the weekend.

Santos said NEDA is now studying the proposal of the oil industry—which includes multinationals like Shell, Chevron and Total, as well as home-grown Petron and other smaller players.

“We will complete the study within two weeks,” he said.

In 2008, Malacañang issued an order to temporarily cut tariffs to zero when crude oil topped $100 a barrel.

Oil products originally carried a 3-percent tariff prior to the Palace order. The government re-imposed the 3 percent tariff in November 2008 after prices of oil in the world market fell from records.

Every percentage-point cut in the import duty, however, translates to about P11 billion in foregone revenues for the government. The Philippines is struggling with a fiscal blowout, with its budget deficit last year breaching the official ceiling. For this year, the government expects its fiscal gap to widen to a record P293 billion as it sustains state spending to nurse the economy’s recovery from the worst global slump in decades.

Santos admitted the reduction in the oil tariff could result in foregone government revenues.

International credit rating firms have warned that the government has to step up its tax reforms to avert a fiscal crisis. They have been forgiving so far to the Philippines in light of its success in holding its own despite the global financial turmoil.

Congress has failed to enact a number of key fiscal reform measures, after legislators took to early campaigning ahead of the May national elections.

Last month, the price of Dubai crude oil averaged $77 per barrel, up from $43 per barrel in the same period last year.

Data from the Department of Energy showed that as of February 2, prevailing domestic prices of diesel are between P31.75 and P34.05 per liter; gasoline, P41.20 to P43.10; E10, P41.40 to P46.02; 11-kilogram liquefied petroleum gas (LPG), P610 to P684; and auto LPG, P26.99 to P28.40.

In January this year, President Gloria Arroyo issued an executive order reducing the tariff from three percent to zero on goods—including petroleum products—bought from other member-nations of the Association of Southeast Asian Nations.