THE United States of America and the Islamic Republic of Iran have agreed to a two-week ceasefire, possibly signaling the end of the Middle East war. With safe passage through the Strait of Hormuz assured, the price of crude oil has plunged to below $100 per barrel — a level it surpassed when the US attacked Iran more than a month ago.
As of end-February 2026, prior to the Middle East conflict, the average pump price per liter was P56 for gasoline, P56.50 for diesel, and P88.10 for kerosene. At present, gasoline costs an average of P102.90, diesel P141.45, and kerosene P163.50.
Government response
On March 25, 2026, President Ferdinand Marcos Jr. signed into law Republic Act 12316, granting the president emergency powers to temporarily suspend or reduce excise taxes on petroleum products in response to surging global oil prices.
The president may act upon the recommendation of the Development Budget Coordination Committee (DBCC), in coordination with the energy secretary, to suspend or reduce fuel excise taxes if the Dubai crude oil price reaches or exceeds $80 per barrel for one consecutive month. Excise taxes will automatically revert to their normal rates — without further legislative or executive action — when oil prices fall below $80 per barrel, or when the three-month relief period ends.
The law is explicit on the “one month” requirement: the Dubai crude oil price must reach or exceed $80 per barrel on a sustained basis within that period. If the increase is not maintained for a full month, no suspension or reduction of excise taxes may be imposed.
The law took effect on April 10, 2026. Notably, the US-Iran ceasefire began on April 8, 2026 — meaning oil prices had already begun declining even before the law became effective.
In my opinion, this is a useless law passed by an incompetent Congress and shortsighted lawmakers. It is the value-added tax (VAT) that truly burdens consumers — not the excise tax.
VAT and excise tax
Under Republic Act 10963, specifically Section 43 amending Section 148 of the National Internal Revenue Code (NIRC), the government imposes fixed excise taxes on fuel: P10 per liter on gasoline and P6 per liter on diesel. These are hard-coded amounts that remain constant regardless of global oil price movements.
VAT, on the other hand, is imposed under the NIRC at a rate of 12 percent, as established by Republic Act 9337.
Here is where most people get it wrong — excise taxes do not increase proportionally with price, but VAT does. VAT rises automatically as prices rise. So, when fuel prices spike, the government still earns more through VAT. The higher the price, the higher the government’s take — or, one might say, its windfall profit.
Consider the figures closely. At P102.90 per liter of gasoline, only P10 represents the excise tax — fixed regardless of the pump price — while P21.72 goes to VAT. For diesel at P141.45 per liter, a mere P6 is the excise tax, while the significantly larger amount of P16.97 goes to VAT.
This is precisely why suspending the excise tax has no meaningful net effect on consumers. A motorist can simply choose to fuel up at a Petron station — which typically offers lower-priced diesel and gasoline compared to Caltex or Shell — and effectively recover that negligible P6 difference anyway.
Government windfall profits
Using estimates based on data from globaleconomy.com, the Philippines consumes an average of 158,704 barrels per day (bpd) of gasoline and 111,943 bpd of diesel. This translates to roughly 25,233,883 liters per day (lpd) of gasoline and 17,799,009 lpd of diesel.
Using these figures, the government earns approximately P359 million per day from excise taxes and P614 million per day from VAT. For the month of March 2026 alone, this amounts to a VAT windfall of more than P19 billion.
Most gasoline stations hiked their prices by more than 100 almost immediately after the Middle East conflict broke out — even before any new fuel imports arrived at those higher costs. Profiteering, by any measure. Yet, when all is said and done, it is the Philippine government that profited the most.
The suspension of excise taxes under RA 12316 is, at best, a political gesture — not a relief to the citizenry. While Congress congratulates itself for saving motorists a mere P6 per liter on diesel, the government quietly pockets P614 million every single day in VAT alone — a tax that automatically swells as prices rise. For March 2026 alone, that silent tax yielded a windfall of more than P19 billion. Gasoline stations that raised prices by over 100 before a single drop of newly priced fuel reached their storage tanks deserve scrutiny — but the biggest profiteer sits not in petrochemical boardrooms, but in the halls of the government.
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