MANILA, Philippines — President Rodrigo Duterte on Wednesday said the Philippines should brace for higher fuel prices as tensions in the oil-rich Middle East escalate.
Philippine inflation soared to 6.7 percent in September, the highest level in nearly a decade.
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Prices began soaring at the start of the year after the government slapped higher excise taxes on fuel and other commodities. The price hikes quickly spread to cover more goods—worsened by a weakening peso.
Stubbornly high global oil prices have also motored this year, pushing up local pump prices.
Philippines a net importer of oil
In a speech at the presidential palace, Duterte said inflation in the Philippines, a net importer of oil, is mainly driven by elevated crude prices in the international market.
He then said world oil prices will likely extend their rally amid friction between US President Donald Trump and Iran, a major crude oil producer.
“We do not have that luxury. And that is why inflation is very high. And you can crucify me if you want. Behead me if you want in public. I cannot do anything about the oil,” the president said.
“It’s getting worse because Iran is about again to make a surprise move simply because Trump does not like Iran and would want Iran to be out in the map of the Middle East, as they also — Iran wants to erase the nation of Israel,” he added.
Starting November 4, Washington will slap sanctions targeting crude oil buyers that will not cut their Iranian oil imports.
The US sanctions on Tehran seek to force the third-largest producer in OPEC to negotiate a new nuclear deal. The looming reduction of Iranian supply has been driving up oil prices recently.
Meanwhile, Saudi Arabia, the world’s largest oil exporter, has vowed to hit back against any sanctions after some American lawmakers have recommended imposing sanctions on the kingdom over the murder of journalist Jamal Khashoggi.
In the Philippines, gasoline price has spiked P8.70/liter year-to-date. Local prices of diesel and kerosene have jumped P10.60/liter and P9.60/liter, respectively, since the start of the year.
Commenting on the president's seemingly defeatist tone, Bukluran ng Manggagawang Pilipino said Duterte should address the "overtaxation of oil."
“The president and his economic managers need not to look far to curb inflation. The solution is staring at them all this time," the group said.
Fuel tax hike suspension still needed?
To combat surging prices, the government plans to suspend an increase in oil taxes scheduled to be levied in January next year. This is in addition to recent measures announced to lower food prices such as liberalizing the importation of rice, a main staple.
Under the Tax Reform for Acceleration and Inclusion Act, or TRAIN law, the increases in petroleum taxes will be automatically postponed should average price of Dubai crude — used as benchmark for Asia — reach $80 per barrel for three consecutive months before the next round of tax hike.
But global oil prices have been declining since the start of October, when it hit highs not seen since 2014 and when oil traders were forecasting prices to reach $100 a barrel.
In an interview with ANC television on Thursday, Socioeconomic Planning Secretary Ernesto Pernia said the economic managers are “closely monitoring” oil price movements.
Pernia also said it would be “ideal” if the oil tax hike will not be put on hold next year to prevent any budget cuts. To note, the Department of Finance has said it will push through with the planned suspension to anchor elevated inflation expectations.
“That will really depend on the movement in price of oil because that is in the law,” Pernia said.
“So we are closely monitoring the movement in the global price of oil and depending on the movements, which way goes then we will make our decision when decision time comes,” he added. — Ian Nicolas Cigaral