August 10, 2018 / 5:41 AM / 3 months ago

Philippines eyes shift back to cheaper, dirtier fuel to tame inflation

MANILA, Aug 10 (Reuters) - The Philippines’ energy ministry has told oil companies to sell a cheaper but dirtier type of diesel oil to motorists to fight inflation, backing away from a two-year-old regulation that banned its use to improve air quality.

The energy department’s plan would need clearance from the environment department, which implemented Manila’s switch to cleaner Euro-IV compliant fuels from Euro-II in January 2016, a rule that covered both oil companies and car manufacturers. The department was evaluating the plan, an official said.

The Department of Energy late on Thursday directed that Euro-II compliant automotive diesel oil should be provided as a fuel option for transport and industrial retail customers “for the purpose of reducing the impact of rising petroleum prices in the world market.”

“We’re studying it right now, giving consideration to their plan to cushion inflation. We’re also looking at the implications for emissions,” Environment and Natural Resources Undersecretary Jonas Leones told Reuters on Friday.

Euro-IV fuels have sulphur content of 50 parts per million (ppm) versus 500 ppm for Euro-II fuels.

Petron Corp, the Philippines’ top refiner, was studying the impact of the energy department’s plan which it only received on Thursday night, a spokesman for the company said. Pilipinas Shell Petroleum Corp, the local unit of Royal Dutch Shell PLC, was checking into the matter, a spokeswoman said.

Philippine annual inflation climbed to its highest in more than five years at 5.7 percent in July, prompting the central bank to raise interest rates for a third time this year on Thursday.

Along with the switch back to Euro II-fuels, Energy Secretary Alfonso Cusi also ordered the government’s Philippine National Oil Company-Exploration Corp to import “low-priced petroleum products, particularly diesel, to mitigate the impact of volatile oil prices.” (Reporting by Manolo Serapio Jr.; additional reporting by Enrico dela Cruz; editing by Richard Pullin)

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