Marcos quizzed: ‘Who bears crisis?’

Malacañang has convened oil industry executives to finalize plans to ensure a steady fuel supply and protect consumers from excessive price hikes, after it was roundly censured for lacking the will and resolve to fully respond to the crisis resulting from the Middle East war.

“In the end, the real policy question for the Marcos Jr. administration is simple: who will be made to bear the burden of the crisis? Committing to the public good means ensuring that those most able to contribute will shoulder more of the adjustment so that those most in need are protected,” independent think tank Ibon Foundation said in a report.

“There is strong reason to believe that government policy remains business as usual. The wealthy and large corporations are shielded, including the oil firms, while the costs are passed on to ordinary Filipinos,” Ibon said.

The government’s responses announced so far, it added, are too small for the scale of the crisis faced by tens of millions of Filipinos already struggling with low incomes and rising prices even before the US-Israeli attack on Iran.

Any reforms undertaken now, in the midst of the crisis, are those that should have been done even in normal times, which were a “stronger regulation of the oil industry, fair taxation, raising family incomes and transitioning to cleaner energy and greater self-sufficiency,” Ibon said.

In the meeting with oil company officials, Executive Secretary Ralph G. Recto headed the government delegation alongside Energy Secretary Sharon Garin.

Recto described the meeting held on 12 March as “productive” and focused on stabilizing both the supply and prices amid the global market volatility.

“This is pursuant to the directive of the President to protect our people from the impact of surging oil prices,” Recto said, highlighting the government efforts such as energy conservation measures and lifeline subsidies for transport groups.

Recto said President Ferdinand R. Marcos Jr.’s efforts to cushion the oil price shocks was evidenced by his certification of a Congress bill as urgent, granting him authority to suspend or reduce the excise tax on petroleum products.

The oil companies assured the government that operational challenges in delivering fuel products remain manageable, and alternatives were being explored as directed by the President.

Garin emphasized that oil firms must adjust their gas station prices to reflect actual market conditions. She warned that any premature, excessive, or unreasonable price increases “will not be tolerated and will be dealt with firmly.”

For appearance’s sake

Ibon Foundation executive director Sonny Africa said the measures announced thus far to cushion the impact of the rising cost of fuel were “more to give the appearance of swift action rather than to provide general relief or to transform the economy for the better.”

The Philippines relies on oil for over half, or 50.8 percent, of its total final energy consumption, with oil accounting for 19,753 kilotonnes (kTOE) of the total 38,898 kTOE consumed in 2024.

Virtually all, or 98.8 percent, of the oil is imported — 27.7 percent from the Middle East, mainly crude oil, and 71.1 percent from East and Southeast Asia, mainly refined petroleum products.

The transport sector accounts for the largest share of imports at two-thirds (65.5 percent), followed by services (11.9 percent), industry (7.6 percent), households (7 percent) and agriculture (1 percent).

The transport sector is highly dependent on oil because it remains the most portable energy source; 95.5 percent of the energy consumed in the sector comes from oil products. Road vehicles are the largest users, accounting for 90.7 percent of the sector’s energy consumption, according to the Ibon study.

An extreme dependence on imported oil makes the economy highly exposed to global price volatility and geopolitical shocks beyond the country’s control.

Reducing this vulnerability means steadily reducing the economy’s reliance on imported oil, but this would take time.

The biggest problem with the oil industry is that oil is treated as an ordinary commodity to be priced by private firms and the market, rather than as a strategic input for transport, agriculture, households and industry.

The setup was formalized with the privatization of Petron in 1993 and by the oil deregulation laws in 1996 (Republic Act 8180) and, as amended, in 1998 (Republic Act 8479).

The traditional “Big Three” oil firms control some 45.5 percent of the market: Petron (27.8 percent of petroleum demand), Shell Pilipinas (14.4 percent), and Chevron Philippines/Caltex (3.1 percent).

The balance is taken up by assorted new players with the largest being Unioil Petroleum Philippines (9.9 percent), Insular Oil Corp. (6.4 percent), Seaoil Philippines (6.3 percent), Jetti Petroleum (3.3 percent) and Phoenix Petroleum (2.5 percent).

The oil deregulation law has to be repealed to overturn the premise of deregulation of such a strategic commodity, and a new law regulating the oil industry has to be enacted, the report indicated.

Africa said the steps that should have been taken early on included making pricing more transparent.

“Oil firms should disclose their import prices, freight and storage expenses, refining and blending costs, inventory costs, wholesale and retail margins and any transfer pricing to the government and the public. The anti-corruption drive last year showed how potent the public and civil society can be to check abuses, if only enough information is made publicly available,” he said.

Prices must be transparent

Regressive taxation should also be removed, Ibon said.

The various petroleum products are subject to excise taxes ranging from P3 to P10 per liter or kilogram, depending on the product. Among the most commonly used items, gasoline has an excise tax of P10 per liter; diesel, fuel oil and LPG, P6 per liter; and kerosene and aviation fuel, P4 per liter. There is also a 12-percent VAT on oil products, which is also applied to the excise tax.

The 12-percent VAT in the Philippines is the highest in Southeast Asia, compared to Indonesia (11 percent), Cambodia, Laos, and Vietnam (10 percent), Singapore (9 percent), Malaysia (8 percent) and Thailand (7 percent).

The country’s oil excise tax is in the middle, between the equivalent of a low of P2.30 (gasoline) and P2.50 (diesel) in Indonesia, and the highs of P10.80 (diesel) in Thailand and P33.80 (gasoline) in Singapore.

“In 2024, the government collected P304.3 billion in oil tax revenues, P178.5 billion from the oil excise tax and P125.8 billion from the oil VAT. This accounted for 17.5 percent of P1.74 trillion in total excise and VAT revenues for the year,” Africa said.

Ibon estimated that the poorest 60 percent of Filipino families pay an average of P420 per month in combined oil VAT and excise taxes, while the highest-income 20 percent pay an average of P1,225 per month.

“The regressiveness of these oil taxes comes from how they account for a larger share of the income of the poorest groups than of the higher income groups,” he pointed out.