The Department of Energy (DoE) is tugging its way into setting up a pricing system that will determine ethanol costs domestically, but it still has major dilemma as to what index it shall adopt for the proposed pricing formula.
Despite its fledgling ethanol production, the Philippines will be the first country in the Southeast Asian region which has been attempting to have its own ethanol pricing index.
Sources from the industry hinted that the energy department has been looking at the price indices of various big-ticket ethanol producers globally, such as the Brazil index for South America and the corn-based ethanol pricing in the United States, and trying to assess which of these pricing strategies can be integrated into the Philippine market.
The DoE, it was reported, is similarly looking at what Platts-Singapore “has been trying to come up with on its proposed ethanol price index for the regional market.”
“The market is familiar with the Brazil (ethanol pricing) index; and there is also the US index which is based on corn for ethanol, but there is really no established index for Southeast Asia that the Philippines can refer to, so it remains a struggle for DoE which index it shall adopt or apply as reference,” a highly-placed industry source has noted.
It was further emphasized that even Platts-Singapore is still keenly evaluating the characteristics of the Asian biofuels market on its plan to draw up a regional pricing index for the commodity. Presently, the Mean of Platts Singapore (MOPS) is generally followed in setting price movements for oil in the region; and the same direction is anticipated for biofuels.
The energy department is reportedly attempting to come up with a ‘straightforward formula’ that shall clearly determine what pricing shall be applied to imported ethanol and which one be employed for domestically-produced component of the commodity when prices are reflected at the gas pumps.
The DoE’s end-goal would be to “issue a consolidated circular on bioethanol which shall then provide as to how pricing for the commodity will be determined,” it was noted.
The Philippine government sees the need to craft its own pricing formula following the full mandate on the 10-percent ethanol blend (to gasoline products) which already kicked in at the pumps last August. The blend is anticipated to go higher in the coming years.
As ethanol importation is not necessarily the course preferred by the policy-framers of the Biofuels Act, the local producers have been batting for certain ‘level of comfort’ as to their proposed investments for production facilities.
They have initially batted for a tariff shield of 20 to 30-percent versus imports; but the DoE’s counter-offer would be a pricing index attuned to the needs of the domestic industry.
