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Shift in marine fuel use to push diesel prices up

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By Myrna M.Velasco

Socially sensitive petroleum products, primarily shipping fuel, may rise by as much as P5.00 to P7.00 per liter early part of next year when the maritime industry shifts its fuel usage to a cleaner alternative with 5,000 parts per million (ppm) of sulfur from currently at 35,000 ppm of sulfur content, according to industry estimates.

The Department of Energy (DOE) is not keen on giving its own calculation of cost impacts, but it indicated that some products – including diesel may incur significant price adjustment.

That will be aside from the fact that the last tranche of additional P1.00 excise taxes for petroleum products under the Tax Reform for Acceleration and Inclusion (TRAIN) Act will also be due for implementation by January 2020.

To ease the cost backlash in the Philippine oil market and the shipping sector, there are current proposals to also enforce “Pantawid Dagat Program”, similar to the “Pantawid Pasada” as a subsidy mechanism relative to this development.

The shift in maritime fuel to a product with less sulfur content is mandatory globally starting March 2020 based on agreement reached by the International Maritime Organization (IMO),but there is a proposal in the Philippines to delay it by at least five years or until 2025.

Domestically, it is the Maritime Industry Authority (MARINA) that has been working on a roadmap to delay the 0.5-percent sulfur content for the domestic shipping industry.

Nevertheless, as noted by DOE Assistant Director Rodela I. Romero, the Philippines will still bear the cost impact on freight because all petroleum products being brought into the country will be through international shipping vessels.

For diesel in particular, it was noted that prices will go higher because this may be used as a “blending component” to lower the sulfur content in existing fuels being used in shipping.

Romero similarly emphasized that in case the country defers its compliance to the IMO mandate, the major question for the shipping industry is “where to source fuel with higher sulfur content as such will no longer be available in the international market.”

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