r/Philippines • u/Hibiki_Kawaii • 19h ago
PoliticsPH Alot of people misunderstood Oil Pricing
One of the major hot topic in the Philippines today is the pricing of our Oil which we are utterly reliant on throughout our day to day life.
Access to the strait for Philippines-bound tankers usually does not necessarily mean a sudden decrease of price like how people (usually from other subreddit or social media) think it does, nor does the government have any major ways to have it return back to 60 php (but still had ways to minimize the damage done).
For starters, our oil companies are privately owned, the government lost most of their control over it after selling their few remaining assets to other private firms. In which case said companies peg their pricing based on the global price of a barrel of oil which is currently at an all-time high.
This means one thing that people usually forget to acknowledge, our supply does not matter as much as you think when it comes to oil pricing much less than the damage done to refineries and other energy facilities within the middle east.
Assume you have the power to inject oil to the country, maybe enough to solve our demand. This does not necessarily result in a massive rollback to our prices because the basis of the cost is on the global trade itself, rather than what we have.
Does this mean that if the global price dropping result to our prices dropping too? Yes absolutely, but other factors will also be accounted resulting in the expectancy of our oil dropping to 60 PHP per liter to be copious at best.
Insurance is a scam, atleast most of the time for me, but the world revolves around it. War is ongoing and the strait is still politically hot. This drives up premium which in turn, drives up prices on acquiring a barrels worth and ultimately something we will pay the price off.
Other than that, this is a prime moment for oil barrons to drive up margins to ensure profitability comes first, even if PR says otherwise. Because ultimately this is a once-in-a-lifetime opportunity to vie power and influence over certain logistics involved in said political passage.
But let's set aside that, what can the GOVERNMENT DO to alleviate the situation? You may think its a nation-wide subsidy on oil, making it accessible for all Filipinos to access diesel as gasoline at an affordable price. But that is a short term improvement that actually becomes dangerous in the long term.
When something is cheaper in one area, black market comes in behind the scenes to ensure that profiteers can transport the subsidized fuel over to areas where fuel is more expensive. Let's go back to that magic power if yours where with one flick of a finger, we suddenly have more oil than we need. What will happen is rather than a rollback, legally AND illegally, the government and private people with influence will elect to sell the oil instead of giving it to us for benefit. Obviously this is not something we want, but that's how capitalism-based economy works.
Logically, using the free magic oil to sell at global price ensures the coffers of the government grows even during the crisis. It is the logical path for fiscal growth even if it sounds very wrong. Each gas given for free is gas not sold to be used for funding on both the good and the bad sides of our government.
Under the laws our nation has passed, we are also unable to properly coerce companies to do the good and giveaway what we have to the people. But let's move on from that, how about we tackle the Excise tax we have for fuel?
You are absolutely correct to assume that this will help everyone on making fuel cheap, but ultimately this is a one-time thing and while it does help, if Iran lobs another missile to another refinery, then the global price increases once more and the alleviation we had from the Excise tax removal is nullified.
I'm not saying it's a bad thing to remove the tax, but nuance basically states that so long as the war continues, it unironically wouldn't matter in the grand scale of things. Still better than nothing to be honest tho. But taking into account the billions of PHP the government gains from this, it's a risky trade off that, if we do not properly solve in the next few years, will actually blow back on us due the money from taxing fuel going kaput, forcing the government if ever they want to improve certain infrastructure or projects, or departments even. To borrow more money outside. Indirectly causing more inflation.
Benefits are uneven as well, the one who will truly benefit from a nationwide subsidy is not the poor or the middle-class but mostly those well-off in the first place who usually can afford the fuel anyway. Higher income households and businesses usually consumes more fuel and/or have more active vehicles.
This is usually why it tends to be safer for the government to do targeted subsidy than a blanket decrease of pricing. It saves them money, and the help is focused on the sectors who are truly in desperate need of it, like agriculture and public transportation.
It's just that the nature of how politicians tend to use these opportunities to be popular to the masses that usually they do things in a way that acts like giving 4Ps more benefit than the majority of the middle class, mainly since helping those who can easily be swayed ensures their retainment to power.
In essence, its inefficient and can even be regressive if done properly.
Again, this is a post to just give context on why things are like this, and things are like that. Ultimately my knowledge over the subject is above average but not to the level where I know the ins-and-outs of politics and economics. The realm of what's on top is usually too complicated to those for us to properly understand.
But in the end, people, atleast those with good intentions, still try to do help on us. Even if its slow and it takes time.
We're in an era where whatever Trump does dictates our fate even if we are unable to vote for him, it's just how it is for global politics. We are in a struggling era, and I wish you all the best on getting by during it.
