Caretaker Finance Minister Thanong Bidaya promised not to use tax cuts to tackle the increase in oil prices, which briefly hit a record intra-day high yesterday of US$72.49 (Bt2,740) per barrel in Singapore.

"The measures would distort market mechanisms. It is generally known among academics that the measures would make matters worse rather than better. The subsidies would have ramifications and the burden would fall on the public," he told reporters yesterday.

He insisted that a cut in oil excise taxes would not be on the agenda of a meeting today of government agencies, including the Finance Ministry and the Energy Ministry, which will discuss ways of tackling rising fuel bills.

Caretaker Deputy Prime Minister and Commerce Minister Somkid Jatusripitak will chair the meeting.

Still, he said that there should be a system to control bus fares which are having huge effects on low-income earners. Yesterday, the government turned down bus operators' request to again raise fares, saying that would be possible only when the diesel price hits Bt27.69 per litre.

In January 2004, the government started subsidising petrol and diesel prices. By the time the subsidies were entirely terminated in July 2005, the Oil Fund had accumulated nearly Bt100 billion in losses. The Oil Fund is now collecting Bt2.50 per litre from petrol sales and Bt1.95 from diesel sales to cover the subsidies.

Against Thanong's insistence, the government may today consider cutting fuel excise taxes and negotiate with refineries to lower the refining fee which is about Bt2 per litre, a source at the Energy Ministry said. From the petrol price of Bt28 per litre, oil companies must remit Bt8.42 to the government to cover excise taxes, municipal taxes, value-added taxes, and the contribution to the Oil Fund.

At present, the excise tax on both octane-95 and octane-91 petrol is Bt3.685 per litre, while the diesel excise tax is Bt2.305, according to the Energy Ministry.

"If market mechanisms are to be maintained, the government could lower value-added taxes or the contribution to the Oil Fund. This should help bring down fuel prices," the source said.

Retail fuel prices are now at record levels, after most oil companies, but not PTT Plc, raised retail prices on Wednesday by 40 satang per litre.

Another increase is anticipated as oil companies are still registering losses (or negative marketing fees), while global oil prices keep escalating.

Yesterday, oil prices hit a fresh record intra-day high of US$72.49 after weekly data showed a drop in US gasoline stocks, raising worries that refiners don't have an adequate inventory cushion ahead of the peak summer driving season there.

Traders also are anxious that US-led efforts to stop Iran, Opec's second-largest member, from pursuing a suspected nuclear-weapons programme could lead to a disruption in Persian Gulf supplies.

Light, sweet crude for May delivery surpassed the previous intra-day record of $72.40, set on Wednesday, in electronic trading on the New York Mercantile Exchange. The price then slipped back to $72.30 a barrel, up 13 cents from Wednesday's record close of $72.17. As investors are seeking higher-yielding assets, gold prices have also escalated. Yesterday, the gold price in Hong Kong opened at $636.50 to $637.00 an ounce, reaching its highest level in more than 25 years.

PTT president Prasert Bunsumpun yesterday said the company would wait for another day before deciding to increase its retail prices, pending the meeting of government agencies today. He noted that PTT shoulders a loss of Bt2 for every litre of fuel sold - Bt1 as the negative marketing fee and Bt1 difference provided by its refineries.

"We need to know first what measures the government will consider," he said, adding that so far, PTT has helped the transport and agriculture sectors. PTT has delayed the collection of debts from the Mass Transit Authority of Thailand and provided cheap oil to farmers.

By keeping its prices lower than others, PTT stations have attracted more clients. It was reported in Nong Khai that a PTT station there is now allocated 15,000 litres a day, down from 30,000 in the past. A worker there said the station must limit each customer purchase to Bt1,000 to ensure that all clients are sufficiently served.

High oil prices are expected to increase the operating cost of all businesses. Yesterday, the association of Songkhla fishermen vowed to stop business within 30 days if the government fails to come up with extra measures to lower fuel prices.

"About half the fishermen now stay onshore as they cannot bear the high diesel price, and in the next few weeks, the level could reach 75 per cent," said Praporn Ek-Uru, chairman of the association.

Energy Reporters

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