Feeling the fuel price hike pinch? It might just become worse, at least according to Stephen Brennock, oil analyst at PVM Oil Associates. At the rate things are going, oil prices per barrel might even shoot up to over $100 per barrel.
Right now, oil stands at about $83 per barrel, according to Brent Group. Dubai crude oil on the other hand, which is based on Mean of Platts Singapore (MOPS), is hovering at $77-$78 per barrel.
So what has caused all of this? It all started when the US said it will impose sanctions on Iran, which accounts for around 3 percent of global oil production. While it sounds like a small amount, it's enough to affect the world's global supply, hence, the increase in price. Iran stands to lose 1.5 million barrels per day when the sanctions are imposed by November.
The US is tapping into its oil reserves but Brennock says it will not be enough to offset the loss of Iran in the oil market trade. Saudi Arabia, along with other OPEC (Organization of Petroleum Exporting Countries) nations are also set to produce more oil. But despite all that, it will still not be enough to curb supply deficiencies.
Compounding the issue is the fact that oil from the US and OPEC nations are bought using the US Dollar. With Southeast Asian currencies weak at the moment, it is expected for fuel prices to go up in the next couple of months, more so when Iran gets the full brunt of the sanctions.
There might be some relief for local motorists should crude oil prices based on the Mean of Platts Singapore (MOPS) (averaged by three months) reaches or exceeds $80 per barrel. In Section 43 of RA10963, also known as the TRAIN Law, the additional tax on fuel will be suspended.
In the provision, it states, "For the period covering 2018 to 2020, the scheduled increase in the excise tax on fuel as imposed in this Section shall be suspended when the average Dubai crude oil price based on Mean of Platts Singapore (MOPS) for three (3) months prior to the scheduled increase of the month reaches or exceeds Eighty dollars (USD 80) per barrel".