DOE to decide on ethanol tariff this month

MANILA, Philippines - The Department of Energy (DOE) is set to decide on the issue of tariff on ethanol products this month, a ranking DOE official said.

Energy Undersecretary Jay Layug said they are now in the process of collating all comments on the guideline.

“It’s up for final comment. And hopefully, we can issue it next week. It was a long process of consultation between the oil companies and ethanol producers, because we had to have a balance between pricing for ethanol and also protecting the general public against undue increases in the pump price of fuel,” he said.

But Layug pointed out that an increase in the tariff would never be considered.

“Although it was one of the proposals, we did not do it. Because we don’t want to unnecessarily add to the pump price of fuel. Right now, an increase in tariff is not pursued, since we need to protect the public,” he said.

“Currently the tariff is one percent by virtue of President Arroyo’s executive order issued before. When we were asked for an opinion on that, we did not provide any suggestion. We want to enhance the development of the local ethanol industry while at the same time we don’t want to increase local gasoline prices, which was the difficult part. But I think we came up with a win-win solution that both oil companies and ethanol producers are happy about.”

The Ethanol Producers Association of the Philippines (EPAP) is asking the government to cancel an earlier circular which increases the blending mandate of ethanol to 10 percent.

EPAP president Jose Maria Zabaleta, in a letter addressed to the DOE and Department of Agriculture (DA), said they are also appealing for the government to ensure thru an executive order a one-year local supply from ethanol producers at current pump prices.

The group also requested to ensure imports of the remaining ethanol requirements from other Asean countries to lessen the impact of rising oil prices.

“The ethanol producers comprising both farmers and distilleries express their commitment to help government mitigate the rising cost of gasoline. The Middle East situation is nearing crisis level and the prices of oil in the global market are becoming highly volatile to the detriment of the Philippine consuming public,” he said.

Zabaleta said it is expected that this volatility will remain in the market, and likely keep oil at the “high” range.

“Perhaps, you will agree with our assessment that no one knows for sure how the international oil market will behave in the months to come. Neither are we certain when the political situation in the Middle East will stabilize. What is definite however, is our continued dependence on imported oil. Such dependence puts the Filipino people and our national economy in a very vulnerable spot. We will remain at the mercy of the oil companies unless there is a clear roadmap addressing our vulnerabilities.”

Given this situation, he said EPAP appealed to government to rethink its present approach in addressing the problem and implement the spirit of the alternative fuels program, as outlined in the biofuels law.

“It is our firm belief that one of the main reasons our legislators crafted the biofuels law is to have policy options during times of crisis. Leyte Agricultural, San Carlos Bioenergy and Roxol have annual production capacities of about 75 million liters of fuel alcohol. Unfortunately, these plants do not produce ethanol fuel today as the Department of Energy refuses to adopt what other countries like Thailand did to promote its alternative fuel program,” the EPAP official said.

The installed capacities of the standing plants, Zabaleta said, can be made available and readily deployable to the consuming public. Government can tap these infrastructure and make them operational again by imposing a remunerative ethanol price similar to what Thailand has done, setting the price on an index.

“We need every drop of fuel in theses times of crisis, and the 10 percent ethanol blend is quite a lot of drops. The price- setting power of government must be exhausted to extract ethanol from the existing plants. This can only happen if government sets a price that covers the true operating cost of these plants. Begging oil companies to lower their cost can only take us so far as it is not they, but the oil markets, that determine prices,” he said.

Zabaleta said the ethanol producers built their plants in response to the call of government to start the alternative fuels program.

“We are prepared to perform our civic duty and collaborate with government as long as the DOE and DA recognize that farmers of cane, cassava, or sweet sorghum must be paid a fair price to farm as they are small and many of them are DAR beneficiaries. This farmed feedstock cost should be the basis of the price for distilleries to keep producing clean fuel. Instead of putting money in the hands of foreign oil producers , let us give the right price to our farmers,” he said.