MANILA: The Duterte administration still has room to push for higher excise taxes despite rising oil prices and the continued weakening of the peso against the dollar, officials and analysts said yesterday.
“Whether the oil production cut will hold is iffy,” Budget Secretary Benjamin Diokno said in a text message yesterday.“The impact of weaker peso, which I think is not permanent, is marginal,” he said.The 14-nation Organization of Petroleum Exporting Countries (OPEC) agreed yesterday to cut oil production by 1.2 million barrels a day starting January in a bid to correct an oversupplied market.
This, in turn, jolted global oil prices by as much as 10 percent after the commodity plunged to as low as $20 a barrel over the past two years. Oil is now trading at around $50.
The peso has touched the 50-to-a-dollar level, making imports such as oil more expensive. Diokno said oil prices remained far below their levels last seen during the global financial crisis.
Under official projections, oil prices are assumed to reach up to $55 per barrel next year, while peso will average up to 48 to a dollar.
“The starting point of oil prices decrease is upwards of $100 per barrel. The likelihood that oil prices will go back to their old level, even with OPEC cut, is nil,” Diokno said.
Albay Rep. Joey Salceda, senior vice-chair of the House ways and means committee, agreed. “There is definitely a supply curve problem and even with OPEC cut, they cannot push that anywhere. Cut and they lose revenues,” Salceda said in a forum.
The committee is currently tackling the first package of the comprehensive tax reform program, which includes a hike in oil excise taxes. Salceda said the measure has wide support despite losing the chance to pass it earlier at the committee level. The original target was to bring it to plenary discussions by the end of the year.
“We lost the window, we could have filed it and discussed it already in full flurry… But this bill just needs one call from the President and it will pass,” he said. But according to the Bank of the Philippine Islands lead economist Emilio Neri the government would need to move fast.
“It’s going to be challenging, but certainly still feasible to pursue,” Neri said. The problem will be the peso, which he said is still expected to weaken until 2018 further even after the US Federal Reserve raise rates likely in two weeks.
“OPEC production cuts can only probably bring up oil to as high as $60 a barrel. It may not be sustained above that,” he said.
