DOE struggles to police oil industry, orders firms to submit their inventory
While the Department of Energy (DOE) has warned it would go after oil companies up to the very end of their retail and refining operations, the agency seems to have the lack of expertise in policing industry players as part of the implementation of the Duterte administration’s tax reform package.
In a meeting with oil companies last Wednesday, the DOE reportedly struggled in determining which inventories it shall really be policing.
In the meantime, Energy Undersecretary Donato D. Marcos issued a memorandum yesterday directing oil companies to submit a “duly notarized inventory report as of 31 December 2017.”
The memo cited that for effective monitoring by the DOE, “the inventory (of oil firms) shall be per depot and per product basis.”
The oil firms were also mandated to “require (their) retailers to post in a conspicuous area, for transparency notice of new excise tax for implementation under the TRAIN (Tax Reform Acceleration and Inclusion) in a signage measuring 1 meter by 1 meter in size.”
Prior to the issuance of the memo, however, the oil companies indicated that they had to do some sort of “downstream oil industry for dummies session” with the energy officials who are still apparently lacking in knowledge as to the nuances of the sector’s operations.
For one, they noted that they had to apprise DOE officials of the presence of “dead stock” in inventories or products that can no longer be made available for sale – which is a standard experience in oil markets globally.
That part of the dialogue between the DOE and energy officials turned contentious, according to industry sources, because the agency is reportedly not accepting their explanation “that there is such a thing as un pumpable oil” in their stock.
Dead stock oil, which is often logged in inventories of oil companies, can no longer be pumped out, because doing so could pose risks of contamination to the other products being sold at the pumps.
There were also suggestions for oil firms to modify their SAP system, a data management program that aids business in their product and services procurements as well as in their overall business operations.
Nevertheless, the industry players reportedly objected to that recommendation, because if they will be audited for unwarranted changes in their system, they could be held legally liable for it.
Despite the ludicrous turn of discussions in that meeting, the oil firms in the end still expressed their willingness to submit their inventories – but primarily informing the DOE first of which inventories they can still sell without the enforced excise taxes under the TRAIN Act.
Based on data from the DOE, the demand escalation for petroleum products in the country has been growing at the range of 3.0 percent annually.
That makes it worth monitoring how the higher excise taxes will impact on volume sales within this year, and if it will really result in the prophetic goal of the DOE of resolving Metro Manila’s traffic mess if pump prices will be higher.