MANILA — The continuous oil price plunge may consequently trigger hikes in public consumption, according to Economic Planning Secretary and National Economic Development Authority (NEDA) Director-General Arsenio M. Balisacan.
“The prevailing low oil price environment, which is expected to persist until 2015, may further increase the country’s total oil importation for the remaining part of 2014 and for the whole of 2015 given the country’s high dependence on imported oil,” Balisacan said in a statement.
Balisacan added the fall of oil prices encourages consumption activity, since the decreases allow them to spend for other goods, and away from fares and utility costs.
“The continuing low prices of oil bode well for the country’s consumer activity, given the relief from hikes in fares, utility costs, and other consumer items,” the NEDA head said.
Aside from domestic consumption, Balisacan said the fuel price cuts will also encourage more investments on industries.
However, the NEDA chief notes that lower oil prices affects taxes on oil and the government’s collection if it falls further.
Balisacan calls on policy makers to hike taxes on fuels to recover lost revenues from the Bureau of Customs, which was estimated to be about Php 40 billion.
The economic secretary said the lower payments from mineral fuels also contributed to the decrease of imports at 10.8 percent, a fall to USD 5 billion from USD 5.6 billion for November year-on-year.
“The negative performance of capital goods imports was largely due to the decrease in imports of aircraft, ships and boats, which partly reflects the trough period of the massive re-fleeting program of major airlines, as well as to the reduction in the import value of telecommunication equipment and electrical machinery. Declining global oil prices also brought down the value of inward shipments of mineral fuels during the month,” he said.
On Jan. 11, Fortune reported, citing an Oxford Economics Study, that the Philippines has the greatest advantage on the oil price slashing among 19 countries.
The study, called Oil-pedia, says the Philippine economy can grow as much as 1.8 percent if oil prices stays at the USD 40 per barrel.
But, the Oxford study could not explain the cause of the estimated spurt, since the Philippines is not an oil-producing country and even has a huge dependence on importation.
The Department of Energy (DOE) estimates the Philippines consumes a total of 330 barrels per day, or 10 million barrels a month, with most of it imported from Saudi Arabia.
As of Jan. 27, West Texas Intermediate (WTI) is trading at the New York Mercantile Exchange USD 45.11 per barrel, nearing the 40 dollar mark, but still far from the economic meltdown lows at USD 38.37 per barrel in 2008.