DOE sees crude prices dropping to $50/barrel

The Department of Energy (DOE) expects oil prices to plunge next year, supporting the case for imposing the second round of excise tax hikes on petroleum products under the tax reform law in 2019.

Higher supply and production inventories are the basis for the department’s oil price forecast.

“We’re seeing the price of fuel going down ... the global price... We are seeing ... Dubai crude ... at around the low $50s in the coming months,” Energy Secretary Alfonso Cusi said Tuesday.

“We submitted our forecast and it shows there that the forecast will be somewhere at low $50s. And that supports the recommendation of the Department of Budget and Management and Department of Finance to reinstate the excise tax,” Cusi said on the sidelines of the Energy Investment Forum in Taguig City.

Last Thursday, the Development Budget Coordination Committee (DBCC) decided to recommend the implementation of the second tranche of excise taxes in petroleum products under Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) law.

President Rodrigo Duterte’s economic managers made the recommendation as Dubai crude prices have gone down by 14 percent from an average of $79 per barrel in October to $68 per barrel so far in November.

Oil production and inventories are on the rise and will continue to pressure oil prices, according to the DOE.

Cusi noted that Qatar will be leaving the Organization of Petroleum Exporting Countries, saying this may result in higher output from Qatar.

“Qatar will be acting more independently. Hopefully, that would increase their production and increase the supply in the world market,” he said.

“Well, the law of supply and demand. If there would be more supply, prices would go down,” the Energy chief noted.

“US also will be increasing its production,” he added.

The TRAIN law imposed a P2.50 per liter excise tax on diesel, from zero, and hiked the levy on gasoline to P7.00 per liter.

The law also provides for an additional P2.00 excise tax starting 2019, raising the levy on to P4.50 and on gasoline to P9.00.

The increase, however, could be temporarily suspended if the average price of Dubai crude reaches or exceeds an average of $80 per barrel in three consecutive months before the scheduled hike. —VDS, GMA News