Not making sense

Motorists and consumers may not be aware but in a few weeks time gasoline used for private cars, public utility vehicles or PUVs, motorcycles, and farming equipment will have to be blended with 10 percent ethanol.

Not a good move since tens of thousands of “older” vehicles which constitute the greater number of vehicles on the road are not really compatible with E-10 or gasoline with 10 percent ethanol.

Just recently, the National Biofuels Board (NBB) composed of different government agencies, namely the Departments of Energy, Trade and Industry, Agriculture, Agrarian Reform, and the Sugar Regulatory Administration said it would mandate all oil companies to sell only gasoline blended with ethanol. Currently, a few gasoline grades are still ethanol-free and are used by gasoline-fed engines not compatible with a 10 percent ethanol blend.

This is quite a surprising development given that there are several issues on the use of ethanol.  Under the Biofuels Law of 2006, the use of alternative fuels namely ethanol (for gasoline) and coco methyl ester (for diesel) was premised on a simple ideal – lessen the country’s dependence on imported fuels thus increasing our country’s energy security.

However, several years since the implementation of the law, we are still importing significant quantities of ethanol just to meet the current mandate.  It is estimated that current country demand for ethanol is nearly 400 million liters annually with some gasoline grades exempted from ethanol. Actual local ethanol production is less than 15 percent or only 60 million liters, a whopping shortfall of nearly 340 million liters which have to be imported.  Once government mandates that all gasolines be blended with 10 percent ethanol, this shortfall will only grow bigger.

In essence, we are just replacing imported gasoline with imported ethanol.  How does this contribute to our energy security?

Another issue is price.  Did you know that the government mandates all oil companies to first exhaust all local ethanol supply before allowing ethanol imports?  Problem is local ethanol prices are significantly higher than imported ethanol by nearly 50 percent based on 2012 figures.  Local ethanol prices averaged about P45 per liter as opposed to imported ethanol which was priced at P30 per liter. This would indicate a glaring inefficiency among local ethanol producers who still can’t compete with imports despite having a captive market and a government mandate. 

By mandating oil companies to buy local first, isn’t government passing on the additional price burden to consumers?

It also begs the question: if there is a significant shortfall, why is government pushing for the 10 percent ethanol mandate?  Who stands to gain?  Given the significant price differential between imported and local ethanol, should we look for other avenues to help our fledgling ethanol industry instead of passing on the burden directly to consumers? 

Government should thoroughly study the issues first before they mandate an increase in ethanol use.

The fact is that our sugar industry, the main source of domestic ethanol, is not ready to commit a certain amount of their sugar production for ethanol use. There are even times when domestic sugar production is not even enough to meet local food needs.

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