EVAT hike to boost oil prices

Local oil prices will likely increase by P2.50 to P3 per liter on Feb. 1 with the increase of the expanded value-added tax from 10 percent to 12 percent and the continuing rise in global crude prices, a consumer advocate said.

Consumer Oil and Price Watch (OPW) chairman Raul T. Concepcion said his computation also took into consideration the removal of the 70-percent input VAT.

In a press conference, Concepcion said his estimates would only be applicable to oil importers, mainly small oil players, as the oil price increase will be lower for oil refiners like Petron Corp. and Pilipinas Shell Petroleum Corp.

Oil importers, who source their oil requirements from the region, use Mean of Platts of Singapore (MOPS) while oil refiners benchmark their prices from Dubai crude.

Concepcion however, pointed out that the impact of the expanded VAT would be minimal compared to the cost that would be brought by rising international crude prices as bulk of the expected increase would come from high oil prices in the world market.

Department of Energy (DOE) data showed that Dubai crude increased to $58.44 per barrel average as of Jan. 30 from $53.20 in December.

MOPS prices for gasoline, on the other hand, increased to $66.79 as of Jan. 30 from $59.90 in December.

Diesel imported from the region likewise went up to $73.14 from $67.20 last month.

"What will happen is that the small players will increase by a small price this week and then see what the others (oil refiners) will do," Concepcion said.

The COPW chief pointed out that his group believes that  government should not increase the VAT on petroleum and electricity by two percentage points.

He said President Arroyo should initiate her emergency power and "give the highest priority" to capping the VAT on petroleum and electricity at 10 percent.

The businessman said government can substitute revenues that will come from the expiration of income tax holiday (ITH) of certain power plants to the revenues that will be lost once the additional tax on petroleum and electricity is removed.