How the diesel price increase can be cushioned

The rising cost of fuel, particularly diesel, which is the commercial transport, business and industry sectors’ primary fuel source, is already raising anxiety in the country. With the price movement of this vital oil commodity directly affecting transportation fares and cost of goods in the market, the nation is sensitive to every price movement of this oil commodity.

And recently, consumer concern over the rising cost of diesel fuel has been heightened with the proposed increase in transportation fares by bus companies and other transport groups. Should these petitions for fare hike be granted, this would raise the prices of basic commodities in the market, even as it would also deplete the household income of many Filipino families. All these consumer woes are being blamed, though, on the TRAIN Law, which imposed an excise tax on all oil products.

Lowering the cost of diesel

But as the nation anxiously wait for the decision of the Land Transportation Franchising and Regulatory Board (LTFRB) on the petition for fare increase by transport groups, and as consumers anxiously monitor the price movement of oil products, there is, however, a law that could help lower the cost of diesel fuel without affecting its efficacy as a power source.

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Called the Bio-fuel Act, the law requires all oil companies to use, as an additive for its diesel fuel products, up to five percent bio-fuel. But for whatever reason, not only are the law’s bio-fuel technical specifications tailored-fit for coconut oil, but only three percent bio-fuel is currently being added to diesel fuel.

Cushioning the impact of TRAIN

But how can the Bio-fuel Act cushion the impact of TRAIN on diesel products and consumers? When properly applied, the Bio-fuel Act would significantly lower the pump price of diesel fuel.  Unfortunately, though, while the law’s bio-fuel specifications are tailored fit for coconut oil, there are, however, allegations that some companies are importing palm oil and using them for their bio-diesel instead.

The allegations practically defeat the purpose of the Bio-fuel Act to lower the pump price of diesel fuel, through the alleged manipulation by some unscrupulous companies  of the   vulnerability of the Bio-fuel Act.

As of February 14, 2018, for instance, the price of crude coconut oil in the world market was $1,250 per metric ton, while the price of palm oil was only $625 per metric ton. With the price of palm oil almost half the price of crude coconut oil, just imagine how much profits the manufacturers of bio-fuel that allegedly use palm oil instead of coconut oil for their bio-diesel are raking in, while consumers are practically deprived of their right to cheaper diesel fuel.

Moreover, should the Bio-fuel Act’s technical specifications for bio-diesel allow the use of palm oil, the local coconut industry should be able to export more of its products into the world market and help raise the country’s dollar reserve, without affecting the country’s  Bio-fuel program.

In short, allowing the use of imported palm oil as an additive for diesel would be a win-win situation for the country, especially if the provision allowing the use of up to five percent bio-fuel in diesel is maximized, as this would lower the pump-price of diesel and, perhaps, help raise the country’s  dollar reserve at the same time.

I am, therefore, suggesting for the Department of Energy (DOE) to amend its technical specifications for its oil additive for bio-diesel that would now legally allow the use of palm oil.

Moreover, I am also suggesting that an inventory of the country’s palm oil importations be conducted by concerned government agencies vis-à-vis its end-products, whether as edible cooking oil or whatever other products.

This could be a tall order for all concerned government agencies. But as one of the leading industry groups in the country, we are ready to lend a hand should our suggestions be given due course by the government.

 

 

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Turning Points 2018