Scrapping of 3% MFN rate on oil opposed

MANILA, Philippines - Independent oil players Unioil Petroleum Philippines Corp., Pryce Gases Inc. and Seaoil Philippines Inc. have opposed the reduction of the most favored nation (MFN) rate on oil imports to zero percent.

The MFN rate - the duty on oil imports from non-ASEAN countries - currently stands at three percent.

The oil firms argued it is more costly to import from the Middle East since the transportation costs adds on the purchase price, thereby increasing the cost when refined petroleum products are sold in the domestic market.

They said the quality of Middle East crude, considered as “sour crude,” actually contains higher amounts of sulfur compared to the “light sweet crude” from ASEAN member countries. Lower sulfur means more environment-friendly products.

With the high sulfur content, the oil firms said the cost of refining Middle East crude is also higher than the refining costs for light sweet crude since the refining process is longer and more costly.

The independent oil companies also said the end-product from Petron’s Bataan oil refinery is incapable of meeting the world standard for Euro IV-compliant emission levels.

 “Petron’s oil refineries can only reduce sulfur content in diesel fuel to 500 ppm. The European standard for diesel prescribes a reduction to 50 ppm while the Japanese standard of ultra-low sulfur fuel is 10 ppm. Clearly, there is no point in encouraging local refineries when their present capacities cannot meet world standards,” the companies said.

Former Bukidnon Rep. and Liberal Party senatorial candidate Nereus Acosta expressed support to the independent oil players’ stance.

A known environmentalist who was instrumental in the passage of the Philippine Clean Air Act of 1999, Acosta said his opposition to the decision of the Tariff Commission (TC) was based on the fact that instead of ensuring the compliance of local refineries to produce environment-friendly refined fuels while at the same time assuring fuel supply in the country, it would be greatly jeopardized by the recent move.

The TC has recommended a reduction of the three percent MFN rate on crude oil and refined petroleum products to zero percent. 

Acosta said the TC should have taken the time to study the issue adding that second and third options being considered by the interagency working group (IWG) would not be in the interest of the public and the environment but may even result in a violation of the provision of Asian-Korea Free Trade Agreement (AKFTA) and the Asean Trade and Goods Agreement (ATIGA) which bound signatory countries like the Philippines to comply.

The first option considered by the IWG is to maintain the three percent MFN rate. The second option is to reduce the MFN rate to zero percent while the third option is to increase the CEPT rate on crude and refined petroleum products to three percent from zero percent and maintain the MFN rate of three percent.

Acosta said these clearly shows that instead of encouraging that petroleum products sold in the domestic market become more environment-friendly, the move would only retain the current level of emissions thereby slowing down the country’s progress to meet world environmental standards.

“The government, through the Department of Energy and the Department of Environment and Natural Resources, should instead move to lessen fuel emissions and meet the world environmental standards. In fact the law mandates that these government agencies must review and revise specifications of unleaded gasoline and of automotive and industrial diesel fuels every two years or when the need arises,” he said.