DOE sees global oil prices stable at $50 per barrel in early 2019

MANILA, Philippines — The Department of Energy (DOE) expects international oil prices to hover around $50 per barrel in the first few months of 2019, supporting the recommendation to proceed with the scheduled increase in excise taxes on fuels next year, the agency’s top official said yesterday.

The Development Budget Coordinating Council (DBCC) has recommended the implementation of the second round of fuel excise tax hike next year under the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

Starting January next year, the TRAIN Law will impose higher excise tax on gasoline from P4.35 per liter to P7 per liter, P2.50 per liter for diesel, P3 per liter for kerosene and P1 per kilogram on liquefied petroleum gas (LPG).

“Our forecast supports the recommendation by the committee with DBM and DOF. We see Dubai crude oil hitting the low $50’s in the coming months,” DOE Secretary Alfonso Cusi said on the sidelines of the agency’s Energy Investment Forum in Taguig City.

The latest recommendation of DBCC—composed of heads of the Department of Finance (DOF), Department of Budget and Management (DBM), National Economic and Development Authority (NEDA), Bangko Sentral ng Pilipinas (BSP) and the Office of the President for oversight—runs counter to a recommendation it made last October.

At that time, international oil prices breached the $80 per barrel level.  Under the TRAIN Law, the 2019 increase in excise tax in fuel can be suspended if the three-month average price of Dubai crude reaches at least $80 per barrel.

“We have submitted our position already alongside the forecast. The excise tax will proceed because the country needs funds to build more infrastructure projects,” Cusi said.

The international Brent crude oil is currently trading at $62 per barrel.

DOE’s forecast was made on the back of the oversupply situation in the international oil market.

Cusi said the US would be pumping out more supply in the market amid the production cuts of the Organization of the Petroleum Exporting Countries (OPEC).

“As of now, the forecast is the world supply is 100 million barrels per day (bpd) and demand is in the low 98 to 99 million bpd so there is a buffer and it is projected that the US will be increasing its production. So if the US will be able to cover for the production cut of Saudi Arabia and Russia, it will be okay,” Cusi said.

The DOE also factored in Qatar’s decision to leave the 15-member OPEC oil cartel.

The country is embroiled in a row with OPEC members Saudi Arabia and the United Arab Emirates, but it said its decision to leave the oil exporting group is not hinged on that.

Qatar, which is one of OPEC’s smallest oil producers, will focus on liquefied natural gas (LNG) potential instead. It is currently the world’s biggest LNG exporter.

“Qatar will be acting more independently and hopefully that would increase their production and increase the supply in the world market. If there will be more supply, then the price would go down,” Cusi said.