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By Euan Paulo C. Añonuevo, Reporter
The government on Thursday ordered the scrapping
of all tariffs imposed on oil after world prices of the commodity
rose to $135 per barrel. With this move, the government itself
breached its target price ceiling for imposing lower duties on
petroleum products.
Energy Secretary Angelo Reyes said that starting
June 1, the government will not be levying any tariff on oil
products in light of the current high prices of oil in a bid to
lower pump prices.
The measure will result in a P0.50 per liter
reduction in diesel prices—the main target of the government’s
tariff reduction scheme —in a step intended to appease the
public-transport sector and consumers reeling from spiraling prices
of oil and oil products.
Reyes said the government cannot afford to go
beyond the zero tariff it imposed and subsidize prices altogether as
these would eat away at official coffers.
“We can no longer bring down the tariff
rate. The next level would mean a subsidy and the government may not
be able to afford to give it,” he added. He noted that the
government is already looking into proposals to lower or remove the
value-added tax imposed on petroleum products to soften the impact
of rising prices.
These proposals, however, “will require
amendments of the law,” Reyes said.
He added that the Department of Energy had
already issued a certification that will lower the 1-percent tariff
on imported petroleum products at present down to zero, after the
average price of the regional benchmark Dubai crude and imported
diesel rose above $91.70 per barrel and $113.00 per barrel,
respectively, from May 1 to 15.
This will result in foregone revenues for
the government of about P11 billion for every 1-percent tariff cut.
Oil products originally carried a 3-percent tariff rate prior to the
government’s reduction scheme.
But the half-a-peso discount on diesel
prices may not be even felt by the public after oil firms’ under
-recoveries continued to pile up from about P7 per liter to P10 per
liter.
The Energy secretary said the reduction may end
up not being felt by consumers if world oil prices keep rising, and
added that short-term measures to cushion the impact of expensive
oil, such as conservation measures, are being discussed at the
national level.
Sources said oil companies may likely jack up
pump prices for the 12th time this year by P1.50 per liter for
diesel, and P1 per liter for gasoline this weekend.
Record-high $135
In London, the price of oil surged to a record
high above $135 on Thursday, pursuing its dramatic upwards spiral on
deep worries about tight supplies and rising demand, analysts said.
World gasoline inventories had just dropped by
800,000 barrels, to 209.4 million, confounding expectations of a
gain of 250,000 barrels.
Reyes noted that experts had predicted the price
of oil would rise to between $150 and $200 per barrel between now
and 2010.
Oil companies have only recovered P3 of the
price per liter after several higher price adjustments at a P1 per
liter level in the past few weeks as the high under-recoveries
compelled them to shy away from a previous understanding with the
government to peg increases at only P0.50 per liter.
Industry sources said the hefty increase
means an extended run for a series of oil price hikes being
implemented by the oil companies. It was a result of crude prices
recently breaching a record level of $135 per barrel for the first
time on Thursday, following unexpected drops in US crude and
gasoline stocks in a tight market.
“This is something that we should gear up
for,” Reyes said. “ This is something that we can’t just wish
away. This is reality, and we should take the necessary long-term
measures.”
The government was also moving toward cutting
the country’s dependence on imported oil by boosting renewable
sources of energy, he added.
Data from the Energy department showed that as
of May 21, the prevailing price in Metro Manila for diesel is P41.67
to P43.97; gasoline, P49.33 to PP51.57; kerosene, P46.15 to P49.30;
while an 11-kg LPG cylinder is priced at P575.50 to P627.25.
The rapid surge in oil prices comes as the US
Federal Reserve, citing higher oil prices, slashed its 2008 growth
forecast for the US economy, the world’s biggest oil consumer, to
a range of 0.3 to 1.2 percent, down from its prior forecast of 1.3
to 2.0 percent in January.
Crude futures have risen by more than a third
since the beginning of 2008 when they struck $100 for the first
time, lifted by a unrest in oil-producing countries, OPEC’s
unwillingness to hike output, high Asian demand for energy and a
weak dollar.
“Currently, market psychology is trumping
fundamentals,” said Victor Shum, an analyst with energy
consultancy Purvin and Gertz in Singapore.
“The psychology is that the oil market is
tight. Even though there is no shortage, global oil demand continues
to grow and supply growth is restrained,” he added.
Supply shorts
Global oil supplies could meanwhile fall far
short of need and expectations in the next 20 years, and the
International Energy Agency is concluding with a vast effort of
detective work on production prospects, a newspaper report said on
Thursday.
The Wall Street Journal reported that a sweeping
review of existing oil fields and investment in oil extraction was
leading the IEA to conclude that the aging of existing oil fields
and inadequate investment meant that “future crude-oil supplies
could be far tighter than previously thought.”
Analysts noted that a need for diesel-fueled
power generation in earthquake-affected areas of China was boosting
demand for the fuel. On the supply side, Abdalla Salem El-Badri,
head of the Organziation of Petroleum-Exporting Countries, has
voiced concern about volatility in the oil market.
-- With AFP and Xinhua
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