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Industry regulations

Oil Prices to Surge as Supreme Court Lifts Freeze Order on VAT Law

Strategic Insights

— 1 min read

The Supreme Court of the Philippines is set to lift the freeze order on the Value-Added Tax (VAT) law, which could lead to a significant increase in oil prices. Industrialist Raul T. Concepcion, chair of the Consumer and Oil Price Watch (COPW), has warned that oil prices will surge further if the VAT law is implemented, with prices potentially increasing by up to 50 centavos per liter. Concepcion has urged both houses of Congress to convene and suspend the implementation of the expanded VAT on petroleum products, recommending a tax rate of no more than 2-3% for petroleum products.

Key Takeaways:

  • The Supreme Court is expected to lift the temporary restraining order on the VAT law, which could lead to a significant increase in oil prices.
  • Raul T. Concepcion, chair of the COPW, has urged both houses of Congress to convene and suspend the implementation of the expanded VAT on petroleum products.
  • Concepcion recommends a tax rate of no more than 2-3% for petroleum products.
  • Oil prices are expected to rise due to the upward trend in global oil prices, with the current price of crude oil reaching a record high of US$67.10.
  • The country uses Dubai crude as the benchmark for oil pricing, which is different from Brent and WTI used in the US and Europe.
  • Oil companies are criticized for lacking transparency in disclosing their basis for price increases.
  • Energy Secretary Raphael PM Lotilla affirms that the Department of Energy will not defer the implementation of the eVAT on petroleum products and energy.
  • DoE Undersecretary Peter Abaya warns of more oil price hikes in the coming weeks, particularly during the cold months of November and December.

Statistics:

  • Crude oil prices have surged by at least 60% since last August, reaching a current price of US$67.10.
  • Dubai crude has reached a price of US$53 per barrel.
  • The country's oil companies increased pump prices by P0.50 per liter following the recent movement in prices of world crude oil.
  • Oil prices are expected to increase by up to 50 centavos per liter.

Sources:

  • Asia Pulse, August 16
  • Philippine News Agency (PNA), August 16
  • DoE Undersecretary Peter Abaya, radio interview

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