Oil firms passing on P0.80/liter ethanol blend cost to motorists

Oil industry players will be passing on a staggered basis up to P0.80 per liter increase in gasoline prices to motorists the 10-percent increase in volume for ethanol blend in fuel commodity, according to the Department of Energy.

Atty Rino Abad, director of the DOE’s Oil Industry Management Bureau, noted that ethanol-linked adjustment in gasoline prices was first reflected in the cost swings this Tuesday (May 18); and that was the main reason why the oil firms reflected a smaller rollback of P0.20 on gasoline products.

If price cuts had been merely based on the Mean of Platts of Singapore (MOPS), the rollback on gasoline products that the consumers can enjoy this week should have been a heftier P0.40 to P0.50 per liter; but as it ended up, that was reduced to P0.20 per liter because of the higher ethanol prices being recovered by the oil firms.

“Ethanol weighted prices for the past quarter continued to go up. Instead of increasing a total of P0.80 per liter one-time, a P0.20 to P0.30 per liter gradual increase of gasoline prices over and above the movement in MOPS is implemented for the succeeding adjustment dates,” Abad explained.

And given that it was still a smaller portion of the aggregate ethanol cost recovery that had been passed on, the energy official indicated that additional adjustments are still expected in the forthcoming rounds of pump cost movements.

He emphasized the staggered price escalations had been resorted to by the industry players, “so as not to burden the consuming public with a one-time increase.”

When asked on the discrepancy of the MOPS-based price adjustments as announced on Monday (May 17), the oil companies simply stated that “it was due to the ethanol component” of the gasoline products.

Prices at the domestic pumps move on a weekly basis, but other cost components – like the ethanol blend on gasoline as well as the coco methyl ester (CME) mix on diesel, are only adjusted based on quarterly pricing.

The oil companies said local sourcing of ethanol had been exerting pressure on prices at the gas pumps, especially at this time, because the cost of local production have been on up-ticks.

Government policy favors the procurement of ethanol supply from local produces, so this can generate employment as well as cash-stream opportunities to the Filipino farmers.

Since the implementation of the initial 10-percent ethanol blend in 2009, the DOE has not increased that yet given concerns of lacking domestic supply; and there had been reluctance to opt for importation because it will not have any value-added prospects for the local farmers.