Crude futures prices continue to post record highs after breaching the $130 a barrel mark last Wednesday. In my previous article, I have argued that these prices are speculative and while they tend to push prices up in the physical spot market, pump prices in the Philippines should not be affected.

But all Energy Secretary Angelo Reyes can say is that “this is the reality that we must face” as he warned the public yesterday to brace for still higher fuel prices. Reyes added that the government is cancelling the 3% tariffs on imported crude and refined oil to mitigate price hikes by at least 50 centavos per liter.

I do not know what relief this move can provide to hapless consumers considering that oil firms have been implementing P1 a liter weekly oil price hikes and will continue to do so in the coming weeks. Compare this with the proposal to scrap the 12% value added tax (VAT) on oil which can immediately lower pump prices by P5 to 6 per liter.

Unfortunately for the public, the VAT particularly on oil is one of the Arroyo government’s most important and reliable sources of tax revenues. But these revenues are raised at our expense as we are forced to cope with spiraling oil prices amid depressed wages and incomes and job scarcity.

To give an idea how much the government has been collecting from the oil VAT and how it burdens ordinary people, let us look at three of the most socially sensitive petroleum products – diesel, kerosene and liquefied petroleum gas (LPG). In 2007, the average daily consumption for diesel is around 17.63 million liters; kerosene, 4.54 million liters; and LPG, 5.06 million liters.

Applying these consumption levels to 2008 average pump prices, Malacañang has been collecting since the start of the year until May around P122.7 million everyday in VAT revenues from diesel (P82.81 million), kerosene (P17.87 million), and LPG (P22.02 million) alone. This translates to total collections of about P18.65 billion in the first five months of the year for the three petroleum products. (See tables below for details)

Official data from Finance department show that total VAT collections from oil in 2006 and first half of 2007 reached P67.8 billion or 56.2% of total revenues from the VAT during the said period.

2008 estimated VAT collections from diesel
Month	Pump price ave	VAT	Consumption (million liters)*	Est. VAT collections (P million)
Jan	38.45	4.61	546.53	2,521.69
Feb	37.03	4.44	511.27	2,271.88
Mar	38.31	4.60	546.53	2,512.51
Apr	40.28	4.83	528.90	2,556.49
May**	41.54	4.98	546.53	2,724.34
Total VAT collections				12,586.91
* Based on 2007 consumption levels
** Based on 1-7 May ave only
Estimates by Bayan based on DOE data

2008 estimated VAT collections from LPG
Month	Pump price ave	VAT	Consumption (million liters)	Est. VAT collections (P million)
Jan	30.64	3.68	156.86	576.74
Feb	29.52	3.54	146.74	519.81
Mar	29.06	3.49	156.86	547.00
Apr	28.77	3.45	151.80	524.07
May*	29.15	3.50	156.86	548.70
Total VAT collections				2,716.33
* Based on 2007 consumption levels
** Based on 1-7 May ave only
Estimates by Bayan based on DOE data

2008 estimated VAT collections from kerosene
Month	Pump price ave	VAT	Consumption (million liters)	Est. VAT collections (P million)
Jan	39.99	4.80	140.74	675.38
Feb	39.61	4.75	131.66	625.81
Mar	40.90	4.91	140.74	690.75
Apr	42.86	5.14	136.20	700.50
May*	44.12	5.29	140.74	745.13
Total VAT collections				3,437.58
* Based on 2007 consumption levels
** Based on 1-7 May ave only
Estimates by Bayan based on DOE data