Businessmirror August 26, 2018

Page 1

MEDIA PARTNER OF THE YEAR

BusinessMirror

UNITED NATIONS

2015 ENVIRONMENTAL MEDIA AWARD LEADERSHIP AWARD 2008

www.businessmirror.com.ph

A broader look at today’s business n

Sunday, August 26, 2018 Vol. 13 No. 316

2016 EJAP JOURNALISM AWARDS

BUSINESS NEWS SOURCE OF THE YEAR

P25.00 nationwide | 2 sections 18 pages | 7 DAYS A WEEK

DIESEL DILEMMA

Oil firms protest as inflation rise prompts govt to bring back ‘dirtier’ diesel grade to market By Lenie Lectura

MEDAL TALLY R

Country

G

S

B

Total

1

China

71

48

29

148

2

Japan

33

31

43

107

3

South Korea

23

26

31

80

4

Iran

12

11

8

31

5

Indonesia

9

12

16

37

6

DPR Korea

9

5

6

20

7

Thailand

8

7

23

38

8

Chinese Taipei

6

10

12

28

9

India

6

5

14

25

10

Uzbekistan

5

10

7

22

11

Kazakhstan

3

7

24

34

12

Mongolia

3

2

4

9

13

Hong Kong

2

5

13

20

14

UAE

2

3

0

5

15

Singapore

2

1

6

9

16

Cambodia

2

0

1

3

17

Vietnam

1

6

9

16

18

Kyrgyzstan

1

4

5

10

19

Malaysia

1

4

1

6

20

Macau

1

2

0

3

21

Lebanon

1

1

2

4

22

Philippines

1

0

7

8

23

Jordan

1

0

3

4

24

Iraq

1

0

0

1

25

Turkmenistan

0

1

2

3

26

Bahrain

0

1

0

1

26

KSA

0

1

0

1

26

Lao PDR

0

1

0

1

29

Myanmar

0

0

2

2

30

Afghanistan

0

0

1

1

30

Pakistan

0

0

1

1

30

Qatar

0

0

1

1

N

O matter if it’s mandatory or merely optional, oil firms are still expected to sell Euro 2 diesel at their retail stations because competition will compel them to do so.

This was the message of the Department of Energy (DOE), which clarified early this week that the “directive” for oil companies to provide Euro 2-compliant diesel fuel “has been really optional,” according to Energy Secretary Alfonso G. Cusi in a text message. Department Order 2018-0812, signed by Cusi last August 10, stated “all industry players are hereby directed to provide Euro 2-compliant automotive diesel oil at the retail level as a fuel option for the transport and industrial customers.” The order was part of a menu of “inflation busters” that government agencies came up with in a bid to stem the rising tide of inflation. Fuel was a particular concern because the Tax Reform for Acceleration and Inclusion law had imposed higher excise taxes on fuel effective January 1, 2018, thus prompting people to heap the blame on TRAIN for the rising prices, even though officials kept saying the TRAIN alone wasn’t to blame as world oil prices had been increasing. Meanwhile, the DOE came up with its “optional” order for the oil players to offer Euro 2-compliant diesel as well, in a bid to ease prices, especially for the public transport sector. The same DOE order required oil firms to submit a monthly compliance report, indicating, among others, the list of participating retail outlets for proper monitoring by the DOE. “This department order shall

A JEEPNEY plies the Marcos Highway route along an unfinished stretch of the Light Rail Transit Line 2 East Extension Project in Cainta, Rizal. The Department of Energy has directed oil companies to provide Euro 2-compliant automotive diesel oil at the retail level. The shift in focus to lower-cost dirty fuel and away from the pursuit of cleaner air coincides with political pressure to shield the public from rising prices. ED DAVAD

take effect immediately,” the agency added.

Points of view

OIL firms had expressed their opposition to the new DOE order, saying this would entail significant investments in putting the

necessary infrastructure, including storage tanks, dispensing pumps and pipes. “We are doing this for the benefit of the public. We are looking at [it from] the consumer’s point of view, whereas [oil firms] are looking at [it from] a business

point of view,” commented DOE Undersecretary Felix William Fuentebella in a phone interview on Wednesday night. Representatives of oil companies were called to attend an emergency meeting at the DOE office last week.

According to the Independent Philippine Petroleum Companies Association (Ippca), “Secretary Alfonso Cusi agreed that the reintroduction of Euro 2 diesel will only be optional to those who would want to sell it.” Continued on A2

Oil’s surge clouds clean-air quest in emerging economies By Ann Koh and Claire Jiao |

O

Bloomberg News

IL rebound from the biggest price crash in a generation is sparking another revival: the use of cheaper, dirtier fuel in Southeast Asia’s two mostpopulous nations. Indonesia has sought to buy more lower-quality gasoline so far this year than the whole of 2017, while the Philippines is set to resume imports of higher-sulfur diesel after two years. The nations are embracing such supplies once

again as crude’s recovery exacerbates economic pain and boosts inflation, threatening to undermine efforts made during oil’s slump to curb pollution. The shift in focus to lower-cost dirty fuel and away from the pur-

PESO EXCHANGE RATES n US 53.4880

suit of cleaner air coincides with political pressure in the countries to shield the public from rising prices. Emerging markets are grappling with weaker domestic currencies and investors pulling out money, with everything from higher US interest rates to a stronger dollar and the American-Chinese trade war to contagion from the crisis in Turkey posing a threat. “Both Indonesia and the Philippines are for the very first time facing the pressure of what it’s like to have higher energy costs,” said Richard Gorry, a managing director at industry consultant JBC Energy. “This is an interesting way of getting around it, by asking for

lower-quality fuel, but that is a two-edged sword because you have environmental fallout.” Indonesian President Joko Widodo is reining in fuel prices to cap inflation in a bid to increase his chances of a re-election next year. After a two-year freeze on prices of subsidized fuels, Southeast Asia’s biggest gasoline buyer won’t raise prices for 88-RON gasoline and diesel throughout the year, Kompas reported last month, citing Energy Minister Ignasius Jonan.

Gasoline purchases

PT Pertamina, Indonesia’s state oil giant, has sought more than 84 million barrels of 88-RON gasoline

so far this year via tenders, versus about 62 million for the whole of 2017, data compiled by Bloomberg show. By contrast, tenders to buy 92-octane grade slid 45 percent. A fuel with a higher octane number improves the performance of car engines and causes less pollution. In the Philippines, where inflation is at the highest in five years, the government this month told its oil companies to supply Euro 2-compliant diesel to transport and industrial users, an about-turn from the higher Euro 4 standard used since 2016. While the Euro 2 fuel - with 500 parts per million of sulfur - is more polluting than Euro 4 that has 50 ppm, it’s cheaper by

about 25 to 30 centavos per liter, government data show. The fuel downgrade means the country needs to buy the lowerquality grade from overseas as its refineries only produce Euro 4 fuel, with no Euro 2 imports made since January 2016. The net buyer of diesel wants to import Euro 2 diesel by October, said Rino Abad, a director at the Department of Energy. If the plan goes ahead, the Philippines will be the first Asian country to move from higher emission standards to a lower one, said Den Syahril, a senior analyst at industry consultant FGE. See “Oil Surge,” A2

n JAPAN 0.4806 n UK 68.5342 n HK 6.8139 n CHINA 7.7802 n SINGAPORE 38.9315 n AUSTRALIA 38.7414 n EU 61.7305 n SAUDI ARABIA 14.2619

Source: BSP (August 24, 2018 )


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