Consumer group nixes tafiff differential on oil products

The Consumer and Oil Price Watch (COPW) is opposing the imposition of a tariff differential between processed petroleum products and crude oil products.

COPW chairman Raul T. Concepcion said the proposed tariff differential, which if approved will encourage oil refiners to continue investing in the country, needs further study by the government.

The consumer group pointed out that the Supreme Court had given its decision on this matter and this ruling should be respected.

Based on the original Oil Deregulation Law or Republic Act 8180 signed in 1996, there was a four percent tariff differential between imported and refined products but ithis was nullified by the High Court’s ruling.

The tariff differential was cited among the provisions that rendered the said law unconstitutional.

As a result, the remedial legislation under RA 8479 or the Oil Deregulation of Law of 1998 took out the said policy.

At present, both crude and finished products are subjected to a uniform five percent tariff.

The Department of Energy (DOE) had said it is open to the proposal of imposing tariff differentials to lure oil firms like Petron Corp. and Pilipinas Shell Petroleum Corp. to invest in refineries to ensure stability of supply. The Department of Finance (DOF) and Malacanang have also given their support to the proposal.

Concepcion, however, said it would be unfair to impose the tariff differential to serve the interest of only one company, specifically Shell.

He noted that Shell’s rival Petron was able to expand its refinery operations in the Philippines through an efficient overall refinery operation.

Shell has been saying that the imposition of tariff differential will help the company sway its decision to stay in the country. Shell is reportedly retaining its refinery business in the country despite earlier threats of closure.

"Differential could be a big help from the government, but is not a guarantee that we will invest. If that happens it will be big help in terms of swinging the decision one way or the other," Edgar Chua, Shell chairman, said earlier.

For his part, Energy Secretary Raphael P.M. Lotilla said oil refiners are "enjoying the fruits of having stayed" because refineries are making better that oil importers due to high oil prices.

"Of all the oil companies in the Philippines, it’s the refineries right now that are in a better financial position, because of the differentials between crude and refined products. And that’s a phenomenon all over the world," Lotilla said.

Lotilla noted that the price difference of crude versus refined products based on Mean of Platts Singapore (MOPS) have widened. This means that refiners, which use crude as a primary blend, are not as heavily hit by the high oil prices as oil importers.