Independent oil companies favor tariff cuts on petroleum imports

The independent Philippine Petroleum Companies Association (IPPCA) is in favor of the proposed tariff reduction on imported petroleum products but is strongly opposed to the imposition of the tariff differential between crude and finished petroleum products.

"The Supreme Court has already ruled on the unconstitutionality of the tariff differential. It will result to eventually placing the consumers on a disadvantage. This will go against the interest of the public," said IPPCA president Glenn Yu.

Yu said the tariff differential will favor certain sectors of the industry. "This will create an unequal playing field. We should remember that 14 percent of the industry is being supplied by independent players."

On the tariff reduction on imported fuel products, Yu said "provided this will be applied on all fuel products and will be revenue neutral for the oil firms, it is a good proposal."

The government has floated the idea of imposing a tariff differential between crude and finished petroleum products in a bid to lure oil companies into investing in refineries in the Philippines.

Energy Secretary Raphael P.M. Lotilla earlier said the differential would spur interest among oil companies like Pilipinas Shell Petroleum Corp. and Petron Corp. to revitalize their refinery operations in the country.

He said oil refiners are enjoying the fruits of having stayed in the Philippines because refineries are earning better than oil importers amid the regime of high oil prices.

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

The energy chief noted that the price difference between crude and refined products based on Mean of Platts Singapore (MOPS) had widened. Refiners, which use crude as a primary blend, are not as heavily hit by high oil prices unlike petroleum importers.

"Even without tariff differential right now, there is an incentive finally after so many years of being not as competitive as direct importers," Lotilla said.

Consumer and Oil Price Watch (COPW) chairman Raul T. Concepcion echoed Yu’s position, saying that the proposed tariff differential, which if approved will encourage oil refiners to continue investing in the country, still needs careful study by the government.

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 this was nullified by a Supreme Court ruling.

The tariff differential was cited as 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 share a uniform five-percent tariff.