Oil firms urged to speed up ethanol blending to stave off rapid oil price hikes

As consumers grapple with skyrocketing prices of oil products, oil companies are continuously seeking ways to fend off drastic increases at the pump level, which a few players have successfully initiated thus far.

In a presentation before the Department of Energy and the Senate Committee on Trade and Commerce, executives of SEAOIL Philippines Inc., the leading independent oil firm in the country, said they are encouraging other oil firms to accelerate the mandate to blend ethanol (ethyl alcohol) in gasoline and increase the percentage blend to further reduce prices.

SEAOIL has been actively promoting the use of ethanol-blended gasoline as an alternative source of fuel for the transport sector. In fact, it pioneered in offering a 10 percent ethanol blend (E10) in its retail stations on August 2005, nearly two years before the biofuels law was enacted.

Under the Biofuels Act of 2006, gasoline sold and distributed in the country will have to contain at least 5 percent ethanol within two years after the law's effectivity, increasing to a 10 percent blend after four years.

"To date, only SEAOIL has been able to offer E10 in all its retail stations as it continues to offer an economical alternative to the Filipino people as well as to push for alternative fuels in support of the country's energy independence agenda," said Francis Glenn Yu, SEAOIL president and chief executive officer.

As a result, SEAOIL was able to sell regular gasoline at a P2 per liter discount.

In addition, Yu said the company has likewise been providing wholesale prices to public utility vehicles (PUVs) at the pump, resulting to a P1 per liter reduction in prices. To further bring down expenses, the company is urging consumers to choose other cost-efficient alternatives such as autoLPG, which, despite an added cost of installation, can save as much as P16 per liter for motor vehicles.

"SEAOIL is actively promoting the use of autoLPG to replace gasoline or diesel with the rollout of 11 autoLPG refilling stations. We are also increasing our coverage so that more motorists can exercise their power of choice and switch to SEAOIL as it continues to introduce more cost-efficient products and serve as a fiscalizer in the industry," Yu added.

As international oil prices have increased by more than 25 percent over the past two months, local pump prices are now just starting to reflect international prices in the late-September to mid-October period. Mean of Platts Singapore (MOPS), the benchmark price for Asian trades, recently reached inflation-adjusted historic highs of $101.65 per barrel for diesel and $108.74 per barrel for gasoline.

Over the January to November period alone, MOPS gasoline shot up 61 percent to $99.04 per barrel while MOPS diesel soared 60 percent to $105.49 a barrel. In the same period, however, the peso gained 11 percent against the dollar to P43.37 from P48.92. Yu said domestic prices have so far been kept in check due to the cushioning impact of the strong peso-dollar exchange rate

On the domestic front, the increase in wholesale pump prices of gasoline and diesel were more subdued during the 11-month period, rising by 23 percent to P42.25 per liter for gasoline and 16 percent to P37.07 per liter for diesel.

Global crude oil prices have been dramatically increasing as demand heightens in major economies such as the US, China and India, specially for heating needs during the approaching winter season. The weak US dollar is also pushing commodity prices higher as investors use them as a hedging mechanism.

Geopolitical risks also play an important role in oil price stability as sanctions imposed on Iran, political instability in Nigeria and the nationalization of oil reserves in Russia and Venezuela - all major oil-producing countries - have adversely affected global crude prices.