Published on August 26, 2005

The global crude-oil price hit a record high of US$68 (Bt2,797) a barrel yesterday, and Prime Minister Thaksin Shinawatra called that “very scary”.

During his weekly press conference yesterday, he told newspapers editors that the upward movement of the oil price was the one factor he feared most among the other economic problems, including the water shortage along the Eastern Seaboard.

“[The oil price] is an external factor that is difficult to control, but we’re trying to encourage the use of alternative fuels,” he said.

Meanwhile, PTT insisted yesterday it would not raise retail oil prices this week, despite the new high.

Apisit Rujikiatkamjorn, senior executive vice president of PTT, admitted oil prices were highly volatile and that oil traders’ marketing margins were at critically low levels.

“But this volatility should last only a short while. We’d rather wait and see before considering whether to raise retail prices,” he told a Modernine television programme yesterday. He said no matter how much other oil traders wanted to jack up their prices, they had to wait for PTT – which owns the largest retail network – to make the first move.

His comments followed reports yesterday that oil prices had extended their gains, climbing to a record $68 on supply worries sparked in part by a new tropical storm near the Bahamas.

The track forecast by the US National Hurricane Centre in Miami predicted the storm would miss facilities along the Gulf of Mexico that account for about a fifth of US natural-gas production and more than a quarter of the country’s oil output. But traders still weren’t willing to take any chances.

“Who knows what can happen then?” asked Tom Bentz, a broker and analyst at BNP Paribas in New York. “As always, the worst-case scenario is priced in.”

Andy Weissman, chairman of the Energy Ventures Group in Washington, DC, said prices were being driven higher by forces larger than any storm that may or may not impact Gulf production.

“We’re facing a really severe crisis where we seem to have reached the limits of what the refineries can put out and keep up with demand,” said Weissman. “We’re not producing remotely enough finished products, and the light crudes are more vulnerable to price spikes.”

Apisit noted that in the current situation, if PTT reacted swiftly to each up and down, it would end up changing retail prices all the time, which would have a negative psychological impact on consumers.

He noted that recent price increases were not based on market mechanisms, but instead driven by speculators who benefited from reports of possible hurricanes and instability in oil-exporting countries.

“If global prices move up these next couple of weeks, PTT is still capable of shouldering a higher burden,” he noted.

If the global crude-oil price reaches $70 a barrel, that will affect the world’s economy and put pressure on oil consumption, which should indirectly force the price down.

But that might not be true.

The US Energy Information Administration (EIA), the statistical arm of the Energy Department, reported that US petrol stockpiles declined by 3.2 million barrels last week to just under 195 million barrels, leaving them at the bottom end of their average range for this time of year.

The draw on oil, which was more than triple what analysts had expected, came as refinery runs unexpectedly slipped and demand for petrol and other products rose slightly, the EIA reported.

Petrol demand rose 63,000 barrels a day on the week, to 9.47 billion barrels. Averaged over the past four weeks, demand was up 1.6 per cent year on year, said the EIA, showing that growth was continuing to pick up despite record prices.

“Who says high prices are hurting demand?” asked Phil Flynn, an analyst at Alaron Trading Corp in Chicago. “The four-week average keeps rising.”

The Nation, Dow Jones Newswires

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