More drastic moves urged to cushion impact of higher oil prices

VARIOUS groups insist that the Arroyo administration permanently lift the 12-percent value added tax (VAT) on petroleum products, nationalize the oil industry and immediately repeal the oil deregulation law to give the public a respite from the continued increase in oil prices. This despite President Arroyo’s order yesterday for a one-percentage cut in the country’s oil import tariff, from three percent to two percent, as its “quick response” to the spiraling cost of crude oil. Government expects this move to lead to a pump-price reduction of between 23 and 25 centavos a liter at best.

Removing the VAT on petroleum products is expected to pull down pump prices by as much as P4.50 per liter. A full import tariff suspension, meanwhile will only result to a reduction of 70 centavos per liter if applied to diesel products only and 75 centavos if applied to all products.

Independent think-tank IBON Foundation says Malacañang’s response will only benefit transnational corporations (TNCs) from the import tariff cut, since this cost is borne by consumers in the first place. “Experience shows that TNCs pass on costs of high tariffs to pump prices but enjoy savings when tariffs are low,” the group said.

George San Mateo, secretary-general of the transport group Pinagkaisang Samahan ng mga Tsuper at Operator Nationwide (PISTON), says a similar move by Arroyo last year did little to pull down pump prices. PISTON is also demanding the removal of VAT on oil products and the nationalization of the oil industry.

Senator Mar Roxas scored Arroyo’s economic team’s assessment that a VAT moratorium will result in a weaker peso, less government services, and a bigger budget deficit. “We will only let the people’s suffering continue if we do not act now to suspend the EVAT on oil. Our consumption-dependent economy will stall as our people’s purchasing power continues to weaken due to high oil prices,” he said. He also scoffed at Malacañang for choosing its “macho goal” of a balanced budget over its duty to provide financial relief to millions of households facing monthly budget deficits.

As of January last year, IBON already revealed that the prevailing pump price of gasoline and diesel is now more than twice their price when Gloria Macapagal-Arroyo took over in January 2001.” (See Table)

IBON says while the Arroyo administration may argue that the price increases were due to developments in the world oil market, Malacañang should still be held accountable for the deregulation policy that allowed domestic oil prices to soar. The group says that as of last year, oil companies have increased the price of petroleum products by 535 percent since the Oil Deregulation Law was first implemented in April 1996.

The group warns that the increase in oil prices means higher cost of living and an erosion of wages and income this year. It says ordinary households, already facing higher costs of basic goods, water and electricity bills, now have to fork over an additional P76.94 for an 11-kilogram liquefied petroleum gas (LPG).

IBON says jeepney drivers, who are estimated to consume an average of 30 liters of diesel everyday, now have to spend around P1,125.90 to P2,025.90 for diesel even before they can start meeting their required “boundary” or vehicle rental of P600 to P900 per day. “Last year alone, a jeepney driver’s daily expense for diesel increased by P147.30 as the prevailing pump price of diesel jumped by P4.91 per liter between January and November 2007,” the group said.

Filomeno Sta. Ana, coordinator of Action for Economic Reforms, says the government and consumers should now focus on long-term, environment-friendly solutions that will insulate the country from spiraling world crude prices. “People’s behavior has not changed. From an environmental point of view, oil prices should increase to promote oil conservation,” he said. He adds that slashing taxes to pull down pump prices only benefits the middle class but leaves out the non-poor, who consume less fossil fuel.