Gov’t mulls reduction of tariff on crude oil due to increased rate in world market; Energy summit to be held soon

By Ronron
January 5, 2008

Finance Secretary Margarito Teves will recommend to President Gloria Macapagal-Arroyo next week for the reduction of the tariff on crude oil from three to two percent in the light of its increased rate in the world market.

Teves told DZMM radio in an interview Saturday morning that their computation based on the current rate of crude oil in the world market and the strength of the Philippine peso against the US dollar would show that the government will not lose anything if it imposes a tariff reduction on crude oil.

The price of crude oil in the world market reached 100$ per barrel last Wednesday, sending alarm to oil-consuming countries like the Philippines.

“I and (Energy) Secretary (Angelo) Reyes already talked about it last night (Friday) and we said that as far as the formula is concerned, and as far as the new data of the price of oil and petroleum products (is concerned), it can already be recommended to the President and the cabinet that we reduce the tariff duty on crude oil from three to two percent,” Teves said.

Teves said that with a 41-peso-against-a-dollar rate, and the trigger price of crude oil at 78.17$ per barrel and of petroleum products like diesel at at least 115.70$, the tariff rate can already be reduced to two percent.

“This will have a little favorable effect on the pump prices of our gasoline products and crude oil,” he said.

Teves said the recommendation will be forwarded this Tuesday during the Cabinet meeting in Malacanang.

But aside from this, the cabinet is also expected to finalize during the Cabinet meeting the conduct of an Energy Summit that was ordered by Arroyo.

Arroyo instructed Reyes on Friday to call the summit on energy stakeholders “to enhance policies and programs, attract investments in technology, and launch development projects that would impact favorably on energy supplies and prices while helping significantly arrest climate change.”

Reyes, however, was not yet prepared on Saturday to say when the summit will be held.

In an interview on the same radio station, Reyes said they are still planning the summit “because we want it to be well-organized and a very, very productive summit.”

“We are planning it well like having a series of workshops focusing on certain areas, and then capping it off with like a plenary session where the President will be there. And then we will submit our recommendations to the President. And then she approves or disapproves them. And then we will implement,” he continued.

In the meantime, Reyes assured, there should still be no increase in the price of petroleum products in the country over the next three to four days because oil companies here have a 60-day inventory of their products.

He said the price in the world market has also begun “to settle down” again, “so we should not panic immediately.”

In a related development, Reyes disclosed that an examination on the books of oil companies Petron, Shell and Chevron by independent auditors from SGV firm and the University of the Asia and the Pacific should be out by the end of the month already.

He said they hope to determine if indeed the oil companies have been increasing the rates of their products more than what should just be.

The same examination will be done on independent players, and will be continuing especially during price surges of crude oil and petroleum products./DMS