DOE: High oil prices will cause demand drop, rollbacks to follow

A Department of Energy official said Saturday that the agency seeing light at the end of the tunnel amid the continuous spike in petroleum prices brought about by tight global supply and the invasion of Ukraine by Russia.

In an interview on Dobol B TV, DOE Oil Industry Management Bureau Director Rino Abad said that while pump prices are expected to increase in the coming weeks, the higher cost of fuel will eventually discourage demand.

“Kapag masyado nang mataas ang presyo ng petrolyo, ang bumababa ay demand. Kapag bumaba ang demand below one million na problema natin, posibleng in a matter of days o months, magkaroon ng oversupply at magkaroon ng rollback,” Abad said.

(When prices are too high, demand will drop, and if it goes below the-one million [barrel] supply deficit, possibly, in a matter of days or months an oversupply will occur and there will be rollbacks.)

Abad said this citing the outlook of the Organization of the Petroleum Exporting Countries-International Energy Agency (OPEC-IEA) that there will be a supply shortage of one million barrels per day.

“Wala tayong magawa sa [one-million-barrel shortage] dahil kahit anong gawin ng international countries, ayaw tuminag ng OPEC ... lagi lang silang nasa 400,000 barrels [each day] per month,” Abad said.

(We can’t do anything about the one-million-barrel shortage because OPEC sticks to its output of 400,000 barrels each day per month.)

He said the DOE is still pushing for the suspension of excise tax on petroleum, adding that the technical working group under the House committee on ways and means has already drafted a position to suspend excise taxes.

“Ang kabuuan na excise tax sa gasolina ay P10, P6 pesos sa diesel, at P3 sa LPG. Ito ang mga maximum amount na maaaring temporarily i-suspend... subject to full discretion ito ng ating Congress,” Abad said.

(The total excise tax for gasoline is P10, diesel P6, and LPG P3. These are the maximum amounts that can be temporarily suspended… subject to full discretion of Congress.)

The Department of Finance (DOF) has earlier thumbed down proposals to suspend the collection of excise taxes on petroleum products, saying it could impact the budget for pandemic recovery measures. 

Nonetheless, Abad said the Palace still has no official position about the suspension of oil excise taxes.

The Energy official said that the DOE has monitored this week that the prices of premium gasoline stands at around P70 per liter, while diesel’s common price stands at about P68 per liter.

Effective February 22, 2022, oil companies implemented a price increase of P0.80 per liter for gasoline  and P0.65 per liter hike for diesel, bringing the year-to-date adjustments to a total net increase of P8.75 per liter for gasoline and P10.85 per liter for diesel. —LBG, GMA News