Panic-struck Palace summons oil firms

July 19, 2008

Apparently in a fit of panic, the government called yesterday a meeting with oil companies after fuel prices made the biggest jump for diesel, the fuel used by jeepneys and buses, yesterday, a day after a survey showed President Arroyo’s satisfaction rating as the lowest ever for a Philippine president.

Oil companies implemented yesterday the biggest price increase on a string of weekly price hikes undertaken this year with a P3 per liter jump in the cost of diesel.

Energy Secretary Angelo Reyes said yesterday he will meet with heads of local oil companies. Local oil firms have been raising their prices almost weekly, but the latest hike yesterday raised hackles because it came despite a drop in international oil prices.

Crude oil prices had slumped by more than $10 over the past two days on prospects that slowing economic growth in the United States would cut demand for crude, traders said.

New York’s main oil contract, light sweet crude for August delivery, lost 79 cents to 133.81 dollars a barrel, after dropping 4.14 dollars on Wednesday and 6.44 dollars on Tuesday, the sharpest daily decline since January 1991.

London’s Brent North Sea oil for September lost 73 cents to 135.08 dollars. The Brent August contract expired Wednesday down 2.56 dollars at 136.19 dollars.

Oil companies also raised the price of gasoline and kerosene products by P1 per liter yesterday.

Pilipinas Shell Petroleum Corp. and Chevron Corp., two of the big three oil companies, increased gasoline prices by P1.50 per liter.

Reyes, however, as shown in past government moves in the face of the successive fuel price increases, can do little to influence oil companies due mainly to a deregulated industry.

The government is seeking an urgent meeting with the heads of local oil refiners next week following a big rise in fuel prices on Saturday, Reyes said.

Reyes wanted to find out whether the latest increases are justified, aides said, adding he could not intervene directly because the government does not control prices.

The retail price of gasoline went up 19 times this year while diesel and kerosene prices went up 20 times. Since July 2001, the pump price of diesel is now four times more expensive, according to cause-oriented group Bagong Alyansang Makabayan (Bayan).

Seven years ago, the price of diesel averaged around P14.50 per liter compared to P58.94 per liter during the last increase, or a 306 percent increase, the group said.

Oil industry officials have said the increases were unavoidable as local prices are still below the global standard.

President Arroyo’s popularity has fallen to a record low, a new Social Weather Station (SWS) poll showed last Friday, and her aides have blamed the rising cost of food and fuel.

Protesters have scheduled rallies at the offices of leading oil companies next week to condemn the price hikes.

Jeepney group Pinagkaisang Samahan ng mga Tsuper at Operator Nationwide (Piston) said it would petition the government for an additional P1.50 increase in the minimum fare.

Several groups were demanding that President Arroyo lift or suspend the value added tax (VAT) on fuel to bring down prices.

Mrs. Arroyo, however, said the VAT will stay since it is the government’s source for subsidies which she said were being provide the poorest families.

Think-tank Ibon Foundation, however, said lifting the VAT on oil would deliver more direct and indirect benefits to millions of poor Filipinos through lower prices.

IBON research head Sonny Africa said that removing the VAT on oil products would result in lower prices that would immediately benefit nearly one million jeepney and tricycle drivers and their families, as well as almost nine million households using liquefied petroleum gas (LPG). Also gaining will be at least three to four million farmers and fishermen and their families paying for irrigation or fuel for fishing boats. He added that other sectors would also indirectly gain as the effect on inflation caused by skyrocketing oil prices would be moderated.

Africa pointed out that the government subsidies funded by VAT earnings do not reach this many people in as sustained a manner. Africa pointed out that VAT earnings are barely used to subsidize pro-poor projects as P6 for every P10 immediately go to servicing the burgeoning debt.

The bottom line is that the VAT, no matter how small the government says the burden is, is anti-poor and already unbearable, Africa said.

If government needs additional revenues, there are other sources that will not unduly burden the poor, Africa said. These include a genuine and sustained crackdown on corruption which underpins some P140 billion in VAT and income tax evasion annually, reversal of trade liberalization resulting in foregone tariffs of some P100 billion every year, and higher taxes on corporate incomes and luxury goods.

The difficult economic times also underscore the urgency of cutting back on debt service and strengthen arguments for stopping automatic appropriations for debt payments. There could be around P130 billion in savings if even just 20% of total debt payments of P634 billion in 2008 are suspended, Africa said.

At the signing of declaration of merger between her political parties, the Lakas-Christian Muslim Democracts (Lakas-CMD) and the Kabalikat ng Malayang Pilipino (Kampi), President Arroyo said the local prices of petroleum products are still cheaper compared to US and other Asian neighbors.

She said the current price of diesel at P55.90 per liter is still cheaper than the US which is currently sold at P 60 per liter, Thailand (P60 per liter), New Zealand (P67 per liter) and Hong Kong (P71 per liter).

President Arroyo also said that P8 billion from VAT on oil is used to subsidized rice sold by the National Food Authority (NFA) all over the country at P18.25 per kilo, which is lower compared to India (P95 per kilo), Thailand (P56 per kilo), Vietnam (P67 per kilo) and Singapore (P45 per kilo).

The Pambansang Lakas ng Kilusang Mamalakaya ng Pilipinas (Pamalakaya), however, said Mrs. Arroyo should not compare the price of diesel in the country with the United States to convince the people that local diesel price is still cheaper compared to the petroleum product sold in the US.

“She is acting like a modern day reincarnation of Alice in Wonderland who was last seen in the company of illusion makers, false promise givers and escape artists. We declare the Philippine President is in complete state of mental dysfunction,” said Pamalakaya information officer Gerry Albert Corpuz.

“No one in his or her sane state of mind will declare such super stupid statement. The President is highly delusional. Somebody must advise her to leave and undergo a thorough psychiatric treatment,” Corpuz added.

“In the US, low paid workers receive an annual income between US$16,000 to US$30,000 or between P720,000 to P1.35 million per year. On the other hand, minimum wage earners in the Philippines receive an annual income of P 105,000 a year. Yet Mrs. Arroyo has the nerve to put them on equal footing by measuring their financial capacity to withstand the devastating impact of high diesel price. No economist will make such kind of lop-sided and brutally obscured interpretation,” Corpuz added.

Malacañang continued to reject calls to scrap or suspend the 12-percent expanded value added tax (EVAT) on petroleum products, asserting that the controversial tax measure helps the government in maintaining oil products and rice in the country among the cheapest in the region.

But Pamalakaya said President Arroyo is rejecting the proposal to immediately remove the VAT on oil because it is her bread and butter, and a major source of bureaucratic corruption in the government. The militant group said at least P 40-billion in tax payers’ money is lost to corruption every year, and big chunk of the budget for corruption comes from the VAT collected from petroleum products.

‘Mrs. Arroyo will be reduced to nothing, and her evil empire will collapse if she fails to satisfy the greed of her close political associates in and out of Malacañang. The VAT on oil is the one that keeps her to cling to power, because she uses it to perpetually buy political patronage and political loyalty in the name of her survival,” the group added.

“If VAT on oil and power is lifted, how do we replace about P80 billion in revenues, mostly used for the poor?”, Mrs. Arroyo asked at the formal merger of the Cordillera Administrative Region (CAR) faction of the Lakas-Christian Democrats (CMD) and Kampi, the biggest political parties in the country last Friday.

In her speech after the signing of the Declaration of Lakas-Kampi Merger in the CAR, the President called on her partymates to unite behind her administration’s efforts to ensure food security and a job for every Filipino.

“We have come too far, made too many sacrifices on the hard but wiser road taken, to reverse now and give up enduring strengths for popular but counterproductive short-term gains,” she said.

The merger of the two biggest political parties in the country today was signed by Baguio City Rep. Mauricio Domogan for the Lakas-CMD, and Kalinga Rep. Manuel Agyao for the Kabalikat ng Mamamayang Pilipino (Kampi).

The President congratulated Domogan for successful efforts to merge the two pro-administration political factions in the region.

She told the Lakas-CMD-Kampi leaders and members that it is only natural that searching for the best solutions to the country’s problems, there will be differences of opinion and approaches.

“It is easy to understand why many would want to see taxes on oil and electricity removed. But we have to carefully address some hard questions. If VAT on oil and power is lifted, how do we replace about P80 billion in revenues, mostly used for the poor?”She stressed that the VAT had, in fact, “boosted investor confidence” even as “interest rates for 91-day treasury bills went down from 7.7 percent to 2.92 percent.”

“From P56.50, the peso strengthened to P40.20 before bad world economic news brought it back to P45… Wouldn’t lifting VAT erode confidence, and accelerate the rise in interest and exchange rates, raising the cost of living even more?” the President asked.She added: “Won’t scrapping the VAT on energy benefit mainly the well-to-do, who consume 84 percent of oil and 90 percent of power, while depriving the poor of billions in programs now funded by VAT?”

The President explained that lifting the VAT on oil would deprive the vast majority of Filipinos of the “means to ride out the world food and energy crises”

She assured the people, especially the poor, that her administration would mobilize all available resources to help them out in this time of world economic crisis.

“Wherever our discourse leads, let us assure our people of one thing: our administration will continue to harness all the resources at our command to help ordinary Filipino families pressured by cost and calamity, while still pursuing needed investments in people and infrastructure,” she said. Charlie V. Manalo

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