IN an effort to cushion the impact of higher fuel prices on public utility vehicle (PUV) operators, the Department of Energy (DoE) earlier this month issued a directive to oil companies to offer Euro 2-compliant diesel fuel to their customers. On Thursday, however, a key congressional committee recommended the DoE order be scrapped, a suggestion the DoE would be wise to follow.
In its order issued August 10, the DoE directed fuel distributors to sell Euro 2-compliant diesel, which would be about 30 centavos per liter cheaper than the now more common Euro 4-compliant fuel mandated as a minimum standard in 2016. PUVs account for about half of the Philippines’ total consumption of diesel fuel, and PUV operators have understandably been among the most strident critics of the fuel excise tax scheme implemented by the government at the beginning of this year. This, along with higher oil prices, has made fuel costs unreasonably high, they contend.
The “Euro” fuel standards are emissions standards set by the EU, and are accepted as a global benchmark for reducing harmful vehicle emission. The numbers refer to progressively tighter limits on the amount of nitrogen oxides, hydrocarbons, carbon monoxide and particulate matter a fuel can produce; these are mainly controlled by limiting the amount of sulfur in the fuel.
Euro 2-compliant diesel, for example, contains up to 5,000 parts per million (ppm) sulfur, while Euro 4 is 100 times cleaner at only 50 ppm sulfur.
Euro 4 was adopted in 2016 as the minimum standard for vehicle fuels in the Philippines; the most recent standard is Euro 6. The biggest challenge to adopting the progressively cleaner fuel standards is that vehicle engines often need to be modified or replaced in order to work with the new fuels.
The DoE’s order may have been considerate toward the cost burdens of PUV operators, but potentially creates more problems than it solves, and might not even result in lower fuel prices as it intends. As the members of the Congressional Oversight Committee on Biofuels pointed out, the Euro 2 order undermines the government’s PUV modernization program, which primarily aims to remove older, less efficient vehicles from the nation’s roads and replace them with safer and more environmentally tolerable models.
During the committee’s hearing on Thursday, it was also learned that modifying refinery and delivery equipment to accommodate Euro 2 fuels would result in costs that would likely cancel the 30 centavos per liter savings. An official from the Department of Health also explained that use of the dirtier fuel would contribute to increased risk of asthma and pneumonia, along with other undesirable environmental effects.
In defense of its decision, the DoE explained that the order was considered “temporary” and “optional,” and has not been implemented yet. It was clear from the discussion in the committee hearing, however, that the steps fuel producers and distributors would have to take to comply with the rule make it a costly option, particularly if they would be required to switch back to the Euro 4 standard after a short “temporary” period. All this would very likely result in higher fuel costs for every vehicle owner.
We can appreciate that the DoE is trying to follow its mandate to ensure that energy costs for Filipinos are reasonable, but its directive reversing the phase-out of Euro 2 diesel was a manifestly poor decision. The Department should withdraw the order at once.