THE Philippines as a net oil importer would be a “big beneficiary” of the continued slump in global oil prices, although lower prices and plunging demand would likely translate into lower tax collections for the government.
“We will be a big beneficiary of the oil price crash. We import $10 billion of petrol products per year. Our domestic production of oil, all for export, is minimal and production drops every year,” Finance Undersecretary and Chief Economist Gil S. Beltran said in a mobile phone message.
US crude oil futures sank below $0 for the first time in history on Monday, amid a coronavirus-induced supply glut, Reuters reported.
The international benchmark, Brent crude, also slid but not as steep, dipping 9% to end at $25.57 a barrel.
UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said a slump in oil prices is still “net positive,” as ultra-low pump prices will help the Philippines jumpstart its economy once the lockdown is lifted.
However, he noted for Southeast Asian markets, including the Philippines, the benchmark Mean of Platts Singapore (MoPS) “has not suffered the recent fate of the WTI (West Texas Intermediate).”
The government expects to see a decline in tax collections from petroleum products, as pump prices and demand continue to slide amid the coronavirus pandemic.
In a Viber message, Bureau of Customs Assistant Commissioner and Spokesperson Vincent Philip C. Maronilla said that the volume and value of oil imports are down so far in April.
This threatens Customs collections as imported oil is the bureau’s biggest revenue generator.
“There will be [a] lower collection of VAT due to lesser value of petroleum products… and lesser excise tax due to lesser volume of importation,” Rino E. Abad, Department of Energy Oil Industry Management Bureau director, told BusinessWorld.
In the first quarter of 2020, he said that the volume of Philippine oil imports decreased by as much as 460 million liters to 3.3 billion liters from 3.7 billion liters during the same period a year ago.
Mr. Abad noted that from January-to-date, gasoline prices have fallen by P14.52 per liter (L), diesel by P13.94/L, kerosene by P19.15/L and liquified petroleum gas (LPG) by P9.25 per kilogram.
Consumers can expect lower pump prices, although most cannot take advantage of this as Luzon remains under enhanced community quarantine.
“As we follow and reflect oil prices in the world market, these decreases definitely will drive local pump prices down. These were manifested in the numerous rollbacks in the recent weeks,” said Phoenix Petroleum Philippines, Inc. Senior Vice-President Raymond T. Zorrilla.
“As oil companies import its petroleum requirements abroad, [t]axes levied thereon will be dependent on the volume imported by the oil companies,” he added.
Until consumer demand is restored “oil prices will remain weak for the rest of the year,” according to Eastern Petroleum Corp. Chairman and Chief Executive Officer Fernando L. Martinez.
Mr. Martinez estimated demand for petroleum products declined by as much as 60% in the past month, noting this “will certainly impact both on VAT and specific tax collection for the first six months of the year, with possible recovery for the second half of 2020.”
Unioil Petroleum Philippines, Inc. President Kenneth C. Pundanera said the historic crash in US oil futures does not have a significant impact on the Philippine market.
“The price of WTI does not have any impact on demand except for maybe if this eventually is reflected on the retail prices in the US and consumers decide to travel more. But given the current situation consumers will not be able to take advantage so much of the low fuel prices because of the travel restrictions,” Mr. Pundanera said.
Mr. Martinez, who also heads the Independent Philippine Petroleum Companies Association (IPPCA), said the government should take advantage of the low oil prices to boost infrastructure activities in the country.
“These massive collapse[s] in interventional oil price[s] can benefit local construction, transport, and logistics industry as soon as the government decides to resume and gradually normalize these industries,” Mr. Martinez said.
“Provided that the necessary safety protocols for workers and employees are in place and strictly observed, IPPCA supports the phased lifting per area of the transport, construction, manufacturing, hospitality, and real estate industry,” he added. — Beatrice M. Laforga and Adam J. Ang