Fuel prices have not been this low for a very long time. It goes without saying that the reason behind it isn’t exactly good. The Philippine government has had great difficulty in addressing the COVID-19 pandemic and its accompanying cost, so they saw the global oil price drop as an opportunity.
On May 2, 2020, President Rodrigo Duterte signed Executive Order (EO) 113. Taking effect immediately, EO 113 states that a 10% tax (or properly, “Duty”) is to be placed on the importation of both crude oil and refined petroleum products.
“There is an urgent need to augment the government’s resources to sufficiently finance the programs and measures to mitigate the effects of the coronavirus situation, and launch the country towards recovery and rehabilitation,” said President Duterte on the signing of EO 113.
What does this mean for us?
Since the Philippines is dependent on the importation of petroleum products, the additional 10% tariff (AKA exact monetary value based on imported product's unit price) can help the Philippine government raise income. Granted that the local petroleum companies will shoulder the added cost, this tax will serve as an added source of funding for the country. This is to be placed on top of the existing 3% tax on importation.
For consumers, it follows that the increase in importation costs will result in higher prices for consumer goods. However, crude oil futures have been hovering at really low prices; even going down to negative a few weeks back. This brings us to the fact that the implementation of the added tax is only temporary. Until such time that the modified rates of importation duty revert back to 0, or the President’s emergency powers cease to take effect, the added tax will continue to be paid.
Will it mean an increase in the price of fuel at gas stations? In theory not yet, at least. There should a good supply of petroleum following the sharp decrease in demand. The tariff should be in effect on incoming shipments when local petroleum companies need to import more. By then, we may see an adjustment in prices.