Immobility

We have reached the tipping point.

Next week, for the third week in a row, fuel prices will spike substantially. Both gasoline and fuel will be priced over P100 per liter. The staccato of price increases will not be easy for our economy to digest.

By next week, the cumulative fuel price increases could produce a mobility crisis that paralyzes our economy. If it is too expensive to move people and goods across distances, productivity collapses. Inflation becomes exponential. Poverty becomes a flood.

Over the past few days, transport groups have signaled the distress. Network drivers and tricycle operators have complained about their exclusion in government’s subsidy scheme. Bus companies have issued statements saying it will be “impossible” for them to continue plying their routes unless fares are quickly adjusted.

Transport providers have asked government for fare adjustments months ago. Government declined – possibly for reasons relating to collapsing popularity ratings. This week, transport groups are threatening to go on strike.

Government finds itself at the crux of a complex problem. With fuel prices rising above P100 per liter, providing transport for millions of commuters under the existing fare schemes ceased to be viable. If fares are increased, commuters could hardly afford them. Everything freezes in place.

The fuel price/transport fare equation has now burst out of the old parameters. It can no longer be solved by the old method of handing out fuel subsidies to registered public transport vehicles. Government can no longer afford what is required for a meaningful subsidy program that will keep both transport operators and commuters viable. We have not provisioned for a scaled-up subsidy program.

There is rising clamor for government to withdraw VAT and excise taxes imposed on fuel to mitigate the price shock. But government cannot afford such a withdrawal. Government is absolutely reliant on revenue generated from taxing fuel. If it shuts down that revenue source it will go bankrupt.

Government has hit a fiscal ceiling. Years of excessive borrowing to feed subsidy programs kicked up our national debt to nearly P20 trillion pesos. Further borrowing, if that is still possible, will kick up the cost of financing. Therefore, it is unlikely for this government to yield to the popular clamor.

Which leaves us with no option for dealing with the current fuel price and mobility crisis. Since fuel prices and transport fares spiked beyond affordability, more and more people will decide to accept immobility as a way of life.

Except that this will kill our economy.

Fuel marking

Fortunately, government has become more efficient in marking fuel and collecting the revenues due from what is sold. Without fuel marking, and at present prices, the gates might have been fully open to oil smuggling. Our consumers would have been left defenseless against inferior products infiltrating the domestic market. Imagine the market chaos that might have erupted under the circumstances.

According to numbers provided by the Bureau of Customs, the fuel marking program was able to mark 21.102 billion liters of fuel through 2025. This helped ensure the collection of P154.06 billion in excise tax and P93.04 billion in VAT – for a total revenue collection of P247.12 billion to support our chronically deficit-prone national budget.

The fuel-marking program achieves more than merely ensuring tax collection. On top of revenue protection, it is a vital anti-smuggling tool. It ensures market integrity and consumer protection.

Fuel is a high-volume, high-value commodity. Illicit trade and faulty declarations create not only a substantial amount of lost revenue but also distorts what must be an even playing field for legitimate businesses.

We are using what is probably the best technology in the world for the fuel-marking program. SICPA, the Swiss company behind the marker system we currently use goes beyond laboratory examination of chemical composition. Tests are continuously conducted under real-life operating conditions, including combustion and emissions analysis.

Independent laboratories in Europe have conducted scientific studies of the marking system. They found that fuel marking produced no differences in fuel characteristics, vehicle performance or emissions between market and unmarked fuels. As in all science, experts and stakeholders are free to examine the testing procedures and methodologies through the websites of the laboratories that conducted the tests.

Given how vital fuel is to any economy, governments need a marking system that is capable of protecting public revenues and preserving a fair and transparent market. There are rigorous safety and environmental standards to be met.

Considering the volume of revenues at stake, our two main revenue agencies – the BIR and the BOC – joined forces in enforcing the marking system. Both agencies have developed the rules for field and confirmatory testing of diesel, gasoline and kerosene at depots, storage facilities, tank truck and gas stations. Their operatives have been relentless in their inspections. Unmarked fuel products are seized and charges filed against those trying to cheat the system.

Because of their efforts, our consumers are better assured of product integrity. The same scientific standards are equally applied to competing products, assuring consumers the program is transparent, technically rigorous and capable of guaranteeing the integrity of the fuel supply chain.

Which, of course, does not resolve the price issue for the commodity. We have to look at geopolitics, not science, to provide us answers.

The fuel marking system only ensures the market is protected from unscrupulous interests and profiteers.