Oil tax cut seen yielding economic and political dividends despite price dip

By Chloe Mari A. Hufana, Reporter

A TEMPORARY fuel tax cut under Republic Act No. 12316 could still provide economic relief even as global oil prices soften following a ceasefire in the Middle East, analysts said, arguing that the timing of the measure could cushion households and transport operators from lingering cost pressures.

“The key is timing and communication: if people see actual pump price relief, the intervention can still generate both economic and political dividends,” Ederson DT. Tapia, a political science professor at the University of Makati, told BusinessWorld via Facebook Messenger.

“For the President, there is still political value if the move is framed as cushioning households and transport sectors from lingering high fuel costs, not simply reacting to market headlines,” he added.

The law grants President Ferdinand R. Marcos, Jr. emergency authority to suspend or reduce excise taxes on petroleum products during periods of extraordinary price shocks.

The law was signed on March 25 but the President has yet to decide whether he would cut or remove the excise tax on fuel, with the Executive branch citing volatile geopolitical conditions and the need to assess economic trade‑offs.

The law takes effect 15 days after publication in the Official Gazette, which falls on April 13. Its activation coincides with initial signs of easing global oil prices after the US and Iran agreed to a two‑week ceasefire after weeks of hostilities.

Earlier fighting in the Middle East had driven sharp increases in pump prices in the Philippines, which relies heavily on imported fuel. The price surge prompted the government to declare a year‑long national state of energy emergency to manage supply risks and temper inflationary pressures.

Analysts said domestic consumers and transport operators are still absorbing the impact of earlier price spikes, even as international benchmarks show short‑term declines.

Fuel costs remain elevated compared with pre‑war levels, keeping pressure on household budgets, farm production and logistics‑intensive industries.

Noel M. Baga, co‑convenor of the Center for Energy Research and Policy, said the fuel tax cut provides limited relief and should be paired with additional interventions.

He noted that the estimated P6‑a‑liter reduction in diesel prices allowed under the law is small relative to pump prices that had climbed close to P170 per liter at their peak.

Mr. Baga said price ceilings under the Price Act could help moderate volatility if global conditions deteriorate, while longer‑term reforms are needed to reduce exposure to oil shocks. He also cautioned against assuming the ceasefire signals a durable resolution of regional tensions.

Global markets reacted cautiously to the truce. Reuters reported that extended talks between the US and Iran in Pakistan failed to produce an agreement to end the six‑week war, with negotiations ending without a breakthrough after more than 20 hours. Both sides blamed each other for the impasse, keeping uncertainty elevated.

Philippine Energy Secretary Sharon S. Garin said diesel prices are projected to fall by as much as P20.89 per liter, while gasoline could decline by P4.43 per liter and kerosene by P8.50 per liter for April 14 to 20, based on international price movements. She said the projections reflect easing crude prices and foreign exchange movements.

Mr. Baga said the respite should be used to address vulnerabilities exposed by the crisis. He warned that access through the Strait of Hormuz remains constrained and that prices are still well above pre‑war levels, leaving markets sensitive to renewed disruptions.

He also pointed to domestic power risks as the dry season reduces hydropower output while electricity demand peaks during summer months.

Transport groups earlier urged Mr. Marcos to use his emergency powers promptly, arguing that delayed action reduced the practical benefit of the tax cut for drivers and commuters. Analysts said expectation management is critical, as falling global prices could narrow the visible impact of the tax suspension at fuel stations.

Fiscal costs remain a concern. Finance Undersecretary Karlo Fermin S. Adriano has said the Philippines could lose about P136 billion in revenue in 2026 if excise taxes on petroleum products are removed. Of that amount, about P121.4 billion would come from foregone excise taxes, while P14.6 billion would stem from lower value‑added tax collections tied to fuel prices.

Under the rules, excise taxes are capped at P6 a liter for diesel and P10 a liter for gasoline and other petroleum products, with a 12% value‑added tax applied broadly to goods and services.