There is something revealing about President Ferdinand Marcos Jr.’s insistence that the Philippines should look to its Southeast Asian neighbors for ways to contain rising fuel prices.

The obvious question is why Malacañang has been so reluctant to adopt the very mechanisms that other governments in the region are using to shield consumers from international oil shocks.

The answer may be less about whether the Philippines has policy choices than about the fiscal price of making one of them.

The Philippine government collects taxes every time Filipinos buy fuel. Petroleum products are subject to excise taxes, while value-added tax is applied to taxable transactions. That creates an uncomfortable fiscal reality: when the price at the pump rises, VAT collections rise with it.

This does not mean that the government deliberately wants gasoline or diesel to become more expensive. That would be an unjustified claim. But it does mean that the Treasury has a fiscal interest in preserving petroleum-tax collections at precisely the moment consumers are asking government to reduce the tax burden.

And Manila’s fiscal position makes that tension particularly important.

The Bureau of the Treasury reported that national government debt reached ₱19.61 trillion at the end of August 2026, up ₱217.62 billion from July and ₱1.90 trillion, or 10.72 percent, from the end of 2025.

The government’s fiscal deficit is also widening. By August, the year-to-date budget gap had reached ₱1.05 trillion, 21.3 percent higher than the comparable period a year earlier. The August monthly deficit alone reached ₱161.3 billion, up 90.23 percent from August 2025.

This is the context in which every peso of tax revenue becomes politically valuable.

The government does not need higher oil prices to increase the fixed petroleum excise tax. Those rates do not automatically rise when international oil prices rise. But it does collect more VAT when the taxable value of fuel sales increases.

The arithmetic is significant.

The Department of Energy reported petroleum-product demand of 14.18 billion liters in the first half of 2025, with diesel accounting for 42.67 percent and gasoline 30.57 percent. That translates to roughly 6.05 billion liters of diesel and 4.34 billion liters of gasoline in just six months.

Using that consumption base, a ₱1-per-liter increase across gasoline and diesel would raise the VAT-inclusive value of those sales by roughly ₱13 billion over six months. Because Philippine VAT is 12 percent of the VAT-exclusive base — equivalent to about 10.7 centavos of VAT embedded in every additional peso of a VAT-inclusive selling price — the mechanical VAT effect could be in the neighborhood of ₱1.4 billion for six months, or roughly ₱2.8 billion on an annualized basis, assuming consumption remained at that level.

That is an estimate, not an official revenue forecast. Actual collections would vary with consumption, exemptions, import values, exchange rates, inventory timing and the composition of petroleum products.

But the point is unmistakable: a higher pump price does not merely hurt the motorist. It also generates additional VAT revenue for government.

And this is where the administration’s economic calculus becomes difficult.

The government is borrowing heavily because its expenditures exceed its revenues. At the same time, economic activity is showing signs of losing momentum. The Philippine Statistics Authority reported that the industrial sector contracted 2.4 percent year-on-year in the second quarter of 2026, with construction falling 13 percent.

That combination should worry policymakers.

When government debt is rising, deficits are widening and economic activity is slowing, the temptation is to protect every available source of revenue.

Petroleum taxation is therefore not an insignificant detail in the national budget. It sits at the intersection of fiscal necessity and household pain.

The irony is that attempting to protect revenue through high pump prices can ultimately undermine the tax base itself.

Fuel is not an ordinary consumer product. It is an input into transportation, logistics, construction, manufacturing, agriculture, electricity generation and virtually every stage of the supply chain. When diesel becomes more expensive, the cost of moving food increases.

When gasoline rises, commuting becomes more expensive. When fuel costs rise for businesses, those costs eventually find their way into prices.

The Congressional Policy and Budget Research Department’s 2026 study on the Philippine oil-price shock reaches precisely this broader conclusion: higher oil prices can initially coexist with economic activity, but as energy costs become dominant, the relationship reverses and economic activity weakens. It also finds that petroleum VAT collections are closely associated with import values and exchange-rate movements.

In other words, there is a fiscal paradox.

The government can collect more from an expensive pump today while helping create the economic slowdown that reduces revenues tomorrow.

This is why the administration should be extremely careful about assuming that Filipinos can simply absorb another round of increases.

The government’s economic advisers may reasonably point to household savings and argue that many Filipinos — particularly automobile owners — retain sufficient deposits to withstand temporary shocks.

But savings are not disposable income. Savings are the buffer against unemployment, illness, tuition, housing costs and the next economic emergency.

If households are repeatedly forced to withdraw those savings simply to maintain their previous standard of living, the economy may look stable in aggregate statistics while becoming increasingly fragile at the household level.

That is particularly dangerous for the Philippine middle class. The World Bank has warned that the country’s secure middle class remains relatively small and that nearly 28 percent of Filipinos remain vulnerable to falling back into poverty. The problem is therefore not simply whether Filipinos have money today. It is whether they have enough economic security to withstand repeated shocks.

The danger is that government policy may be calibrated to the capacity of the average Filipino to pay rather than to the capacity of the Filipino household to remain economically secure.

That distinction is crucial.
A household can continue buying gasoline while becoming poorer.
A business can continue operating while cutting investment.
A commuter can continue paying fares while reducing food consumption.
A family can continue paying its mortgage while drawing down its savings.

All of those transactions can keep the economy moving in the short term while quietly eroding its social foundation.

And that is where the government’s fuel-price problem begins to resemble something larger than inflation.

The latest fuel outlook suggests another gasoline increase next week, even as international oil markets remain volatile. The DOE has already certified that the average Dubai crude price exceeded the statutory threshold that permits the government to consider petroleum-excise relief.

The government therefore has a choice.

It can continue emphasizing the limits of fiscal intervention and effectively ask households to absorb the shock.

Or it can recognize that temporary revenue foregone today may be the price of protecting economic activity, household consumption and ultimately the government’s own future tax base.

Other governments in Southeast Asia have chosen variations of the latter approach.
Malaysia has maintained targeted fuel subsidies while allowing unsubsidized prices to reflect market conditions. Vietnam has used fuel-tax relief to cushion consumers from international price shocks. The Philippines itself has already demonstrated that tax relief is legally and administratively possible: President Marcos suspended excise taxes on LPG and kerosene earlier this year after Dubai crude exceeded the statutory threshold.
The question is therefore no longer whether Manila has tools.

It does.

The question is how much revenue the government is willing to sacrifice today to prevent a much larger economic and political cost tomorrow.

That cost could eventually be measured not only in inflation, GDP growth or government receipts.

It could be measured in confidence.

For an emerging middle class, economic stability is part of social stability. People need to believe that work produces progress, that savings provide security and that a temporary crisis will remain temporary.

When that expectation begins to collapse, economic insecurity can become what political theorists would describe as ontological insecurity — a disruption of the basic sense of continuity through which individuals and societies understand their future.

That is the risk Manila should be watching.
Not merely another peso at the pump.

But the possibility that millions of Filipinos will begin to believe that the economic security they worked to achieve is disappearing faster than government can replace it.

A government under debt pressure may understandably want to protect its revenues.

But a government that protects today’s petroleum VAT at the expense of tomorrow’s economic activity may discover that it has preserved the tax stream while weakening the economy that produces it.

The middle class cannot be treated as an inexhaustible fiscal shock absorber.

Eventually, the shock absorber breaks.

And when it does, what begins as a fuel-price problem can become a problem of trust — and eventually, of political stability.