By Lenie Lectura - August 14, 2018
The reintroduction of Euro 2 diesel
fuel at the pump is going to be a potential logistics nightmare for oil
companies.
The Department of Energy
(DOE) has issued a memorandum order (MO) requiring oil companies to
provide Euro 2 compliant automotive diesel oil to help reduce fuel prices.
Oil firms and other sectors,
however, said the order runs counter to the Clean Air Act, which mandate the
sale of Euro 4 fuels for passenger and commercial vehicles in the country
starting 2017.
“Pursuant to existing Philippine
National Standards on Diesel Fuel Quality and in accordance with the provisions
of Republic Act 8479, otherwise known as the Downstream Oil Deregulation Law,
Republic Act 8749, otherwise known as the Philippine Clean Air Act and for the
purpose of reducing the impact of rising petroleum prices in the world market,
all industry players are hereby directed to provide at the retail level Euro
2-compliant automotive diesel oil as a fuel option for the transport and
industrial customers,” the MO stated.
The Independent Philippine Petroleum
Companies Association (IPPCA) said the reintroduction is “a big
setback” in the quest for cleaner air as prescribed in the Clean Air Act,
because this means going back to fuel with 10 times sulphur (500 ppm) vs the
much cleaner, or 90-percent less sulphur Euro 4 with only 50 ppm.
“The announcement directing oil
companies to make available again the 20-year Euro 2 compliant diesel caught us
by surprise,” said IPPCA President Bong Suntay in a text message.
“It will be a logistical nightmare
for oil companies to make it available, as additional underground tanks will
have to be constructed at retail outlets as we cannot co-mingle Euro 2 with
Euro 4. It would also mean changing the fuel dispensers in the station in order
to be able to accommodate Euro 2 diesel,” Suntay added.
IPPCA has at least 16 members
composed of the country’s leading independent oil players such as Eastern
Petroleum Corp., Unioil Petroleum Philippines Inc., Seaoil Philippines, Flying
V, City Oil, Pryce Gases and LPGMA, among others.
The DOE, for its part, said higher
sulphur content does not necessarily mean Euro 2 is dirtier than Euro 4, which
has a lower sulphur content.
“It doesn’t follow the Euro 2 is
more pollutant than Euro 4.… The sulphur is not part of the emission standard,”
said DOE Undersecretary Felix William Fuentebella at a news
conference on Tuesday afternoon.
On logistics concern raised by
IPCCA, Fuentebella said oil firms should come up with a strategy to address
this. “That’s the good thing about competition. If they only have one
tank for Euro 2 then they have to put up another tank for Euro 2. That’s where
logistics competition will come into play. They should provide an option,
otherwise motorists will gas up to a nearby competitor.”
Based on studies, Fuentebella said
the price difference between Euro 4 to Euro 2 is about P0.28 to P0.30 per
liter.
The DOE expects all oil firms to
comply even if the memorandum order does not spell out the penalties for
violators. He added that one oil company has committed to abide by the MO
of the agency.
Fuentebella did not reveal which oil
firm will start selling Euro 2 diesel soon.
“There’s no penalty. What we’re
saying is if you don’t expand your menu, then consumers will not line up to buy
from you. We are contributing as a sector on how best to address inflation….
From the point of view of consumers, P0.28 to P0.30 per liter is not
negligible,” he added.
Instead of reintroducing Euro 2
diesel, which may not be made available due to logistical concerns and minimal
price reduction, IPPCA suggested the suspension of the implementation of the
Biofuels law.
“This will be more effective,
particularly the 10-percent ethanol blend on gasoline. With the Euro 4 standard
already in effect, which is 10 times cleaner than Euro 2 standard, the use of
ethanol and even biodiesel is no longer needed in achieving cleaner emissions
from both gasoline and diesel,” Suntay said.
Recent spikes and scarcity of table
sugar can also be traced to the use of the same raw materials. “Sugar cane in
ethanol production, which is given higher priority due to its mandatory
blending to 10 percent of all gasoline products, commanding higher prices, but
more expensive by as much as P4 for locally produced ethanol versus price of
imported gasoline,” he added.
Further, IPPCA said there is
not much difference in international price between Euro 2 and Euro 4
diesel as refineries have also upgraded and shifted production to Euro 4 and 5
diesel.
“Such upgrades in the refineries and
lower demand from other countries had made Euro 2 diesel less available in
the international market,” the group said.
“It is also important to note that according to
international traders, no country in the world who progressed to higher grade
ever reverted back to lower grade,” IPPCA said.
Laban Konsyumer Inc. is also opposed
to the DOE order. “LKI does not agree on the Euro 2 directive. The
DOE is more than two quarters delayed and sitting on the unbundling
of prices of fuel products. That’s the fundamental and basic action to do.
Consumers can know when prices are justified,” said LKI President Victor
Dimagiba in a text message.
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