Shell Co Thailand has called on the government to lower the gap between Octane-95 petrol and gasohol prices to Bt1 a litre, in a bid to tackle ethanol shortages in the next one to two months.

The government has been maintaining a Bt1.50-difference between the two types of fuel to encourage the public to use gasohol instead of Octane-95, which is mixed with imported MTBE (methyl tertiary-butyl ether).

Piraphot Vajrabhaya, chairman of the local Shell firm, said a shortage could occur as ethanol producers are allegedly seeking to increase prices to Bt23-Bt24 a litre from the current Bt19.

"As the final price is not settled yet, ethanol producers might stop production," he said. He expects such a move in the next couple of months.

He suggested the government import ethanol as a substitute the supply and to reduce the price gap. "If the ethanol price is really raised to Bt23, oil companies would be viable only when the gap is lowered to Bt1," he said.

He added that if the ethanol price issue were not resolved soon, the government policy to replace Octane-95 petrol with gasohol by January 1, 2007 would be delayed.

Meanwhile, Shell yesterday launched a new diesel formula, hoping to raise its diesel sales by 10 per cent this year, or by 100 million-150 million litres from 1.5 billion litres.

If the target is achieved, its share of the retail oil market - which consumes 10,000 million litres - would rise from 15 per cent to 16 per cent this year.

Shell is also bullish about launching products such as a new lubricant and a new gasoline formula.

Its share in the local retail gasoline market is about 15-18 per cent.

Like other oil firms, Shell foresees flat growth in domestic retail sales, due to a slowing economy and high petrol prices which are forcing consumers to cut consumption.

Several oil firms have stopped expanding new stations, including Shell, which operates 600 outlets.

"Retail oil companies have incurred losses in the past two years due to low marketing fees. We hope that it won't be the case this year," Peeraphot said.

He foresees volatile oil price movements this year, based on the current price of US$60-$65 (Bt2,352-Bt2,548) per barrel against the $55-$60 that had earlier been forecast. He sees prices weakening in the next two months.

Peeraphot attributed recent volatility to problems in Nigeria.

"Still, global oil prices should weaken over the long term as Opec [Organisation of Petroleum Exporting Countries] countries are expected to keep output on the high side. If they cut production capacity, it could push up prices, affecting the global economy," he added.