Global oil price volatility remains a key driver of consumer inflation in the Philippines, particularly following the implementation of fuel excise tax reforms under the TRAIN Law. This study examines how changes in international crude oil prices are transmitted to domestic fuel prices and consumer inflation from January 2010 to February 2026 using a break-corrected asymmetric error correction model (BC-AECM) that accounts for shifts in the pricing environment. The results identify the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Law, Republic Act No. 10963, as a structural turning point in domestic price formation. The analysis finds stronger long-run pass-through across diesel, gasoline, kerosene, and major price indices, with post-TRAIN pass-through elasticities ranging from 0.374 for LPG to 0.732 for kerosene, suggesting that the post-TRAIN pricing environment has strengthened the effective transmission and persistence of external oil price shocks into domestic prices. These stronger post-TRAIN responses likely reflect not only the arithmetic effect of excise taxation, but also broader behavioral and pricing adjustments in domestic fuel markets following the tax reform. At the aggregate level, the relationship between crude oil prices and inflation also changes, with evidence that oil price movements transmit more directly into consumer prices under the excise-inclusive framework.
Short-run dynamics reveal pronounced asymmetries in price adjustment. Gasoline exhibits conventional rocket-and-feather behavior, while diesel shows a similar but weaker directional pattern. Headline CPI exhibits only mild asymmetry, while transport CPI displays pronounced upward asymmetry, with fare increases rapidly passed through but price reductions only weakly transmitted. These findings highlight the importance of incorporating structural change into fuel price stabilization policy. The results suggest that during periods of severe global oil price volatility, domestic fuel and transport prices may adjust more rapidly and persistently under the post-TRAIN pricing environment, increasing inflationary pressures on households and transport-dependent sectors. This strengthens the case for timely and calibrated mitigation measures, including temporary fuel excise tax relief under Republic Act No. 12316, particularly during periods of sustained external oil price shocks. More broadly, mitigating the inflationary effects of oil price shocks will require complementary measures that address asymmetric price adjustment, particularly in the transport sector, where institutional features of fare regulation may contribute to limited downward adjustment in response to declining input costs.