Oil smuggling worsens
DEMAND AND SUPPLY - Boo Chanco (The Philippine Star) - April 5, 2019 - 12:00am

If you think officials of the Duterte administration are on the same page in dealing with rampant oil smuggling, think again.

Motorists must surely have noticed that the prices of gasoline and diesel vary widely depending on location. The prices of big brands like Petron and Shell are usually reflective of world oil prices, plus local tax component. Not so the other brands.

In San Fernando, Pampanga for instance, the price of regular gasoline had at one point, a price differential of P12.71/liter. In diesel, the price differential hovers in the P4/liter range. Incidentally, there is an oil pipeline from Subic to Clark which may help explain this disparity.

For someone like me who had worked in the oil industry, such a wild variation in prices is suspicious. While oil deregulation was designed to create competition and keep retail prices as low as possible, the situation today can also suggest some dealers are not paying the right taxes.

The tax on gasoline under TRAIN 1’s second tranche brings up total government take at P9/liter and P4.50/liter for diesel exclusive of VAT. Surprise! The price discounts are at around this level. 

Good for the consumer, we might say. And that is precisely the attitude of a spokesman of the Department of Energy. When asked about this, the DOE spokesman, an undersecretary no less, gave a rather wimpy response.

The DOE official said that “the customer has to decide whether he is an end-user when he goes to the gasoline station or if he is from the Bureau of Customs.”

Ano daw? Wala siyang pakialam kung smuggled yung gasoline basta mag-enjoy na lang daw ang consumer. This wimp of an energy undersecretary is saying ang problema ni Dominguez ay hindi problema ng energy department.

Poor Sonny Dominguez is investing his credibility on a potentially useless program to introduce dyes in gasoline and diesel supposedly to catch smugglers. But the energy department couldn’t care less.

Oil smuggling had been a real problem even during past administrations. No political will to stop it. It is obvious the problem became as big as it is now because government officials have allowed it to.

Sec. Sonny is drawing the line the way he did with Mighty. He may yet produce results that eluded his predecessors, if he makes the right decisions.

It is no secret in the oil industry that some of the smaller oil companies have enjoyed the advantage that oil smuggling gave them through the years. Every time government imposes higher oil taxes, the oil smugglers and their protectors make more money.

Prior to the implementation of TRAIN, studies done by the DOF, ADB, the oil industry, and the Federation of Philippine Industries estimated a tax leakage due to oil smuggling of about P40 billion a year. It must be higher now post-TRAIN.  

Then there is a UN Trade report, using Taiwan data, which indicates exports to the Philippines of 91.8 million barrels of petroleum products in 2017. But Philippine data for the same period only reports a total of 3.3 million barrels of imports from Taiwan.

That’s a gigantic discrepancy of 88.5 million barrels which could only mean smuggling… and we are only talking of Taiwan here. There are refineries in Singapore, Thailand, Vietnam which could also be sources of unreported petroleum product exports to the Philippines.

This is so blatantly shameless and scandalous. Experts say that based on the Taiwan figures, there could be at least P60 billion in unpaid excise taxes due to smuggling.

There are many ways of catching the smugglers, and the best is a strict enforcement of the law on VAT. No dyes required, just honest enforcement of VAT on all oil industry players. Input, output! Simple!

But since DOF already fell for the supplier-driven use of dyes, they should first introduce those dyes in the areas notorious for oil smuggling: Subic, Phividec, all our free ports, and private ports.

But the dye supplier wants a volume sale that is easy to manage and is insisting on introducing it in the major oil companies first. This will catch no one. DOF won’t recover its investment on those dyes.

In the first place, Shell and Petron source a good part of their retail products from their refinery. They already paid the taxes on the crude oil they processed. Any hanky panky on oil product taxes poses a serious reputation risk on their brands. They are not stupid.

Sec. Dominguez should not risk embarrassment of a failed program that is also expensive.

President Duterte should crack the whip and support Sec. Sonny in ending this long running problem of oil smuggling. If there are any wimps at DOE who are not ready to help DOF, they should be read the riot act: help, be supportive or ship out.

Boracay showed what government can do when it acts as one team. Licking oil smuggling is a worthy effort that demands as much.

Hatchet job

Over the last few days, I had been getting an e-mail supposedly from former MWSS administrator Gerry Esquivel on the “evils” of the Ayala’s Manila Water. My browser warned me the e-mail address used seems spurious. So I texted Gerry.

Gerry had no idea about that e-mail. That’s not his e-mail address. The “white paper” talks about the supposedly seven deadly sins of the Zobel de Ayala brothers regarding Metro Manila’s water supply.

It is about the controversy about the inclusion of the Corporate Income Tax as part of the allowable expenses of Manila Water. There are conflicting rulings on this issue during arbitration brought by Manila and Maynilad Water Companies.

In short, it is an issue awaiting final ruling. But the headline accuses the Zobels of deadly sins. The folks behind this, also want Gerry to be blamed for this sneaky attack.  

Oh well… it is more fun living here.

Boo Chanco’s e-mail address is bchanco@gmail.com. Follow him on Twitter @boochanco

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