EPPO director Metta Banturngsuk said the refinery sector was in an awkward position as it was operating at full capacity and unable to expand to meet demand.

If the government wanted output to grow over the next five to 10 years, it would have to introduce new measures and incentives to promote the setting up of new refineries, he said.

"We need new refineries with a capacity of no less than 500,000 barrels a day," Metta said. The possible measures are incentives through the Board of Investment. For instance, the government may have to help new refineries find acceptable locations, and tax duplication should be reduced.

The EPPO would have to present its proposal fairly quickly as the six refineries now operating in Thailand have a combined refinery capacity of only one million barrels per day (bpd).

Demand for oil is rising by 5 per cent on average every year, but no new refineries have been built in Thailand since 1997 when the Asian financial crisis hit.

"If we don't decide today, we will have to import oil permanently," Metta said. Even if the government decided to approve new refineries, it would take years before they were able to produce petroleum products. The estimated time to bring a new refinery on stream was five years.

Time would be against even the current refineries, Metta said, as expansion would take at least three years.

The more time the government took to consider the issue, the more valuable foreign exchange Thailand would have to spend on fuel imports.

He said many countries had set out plans to boost their refining capacity to ease the pressure from oil price hikes. These include Burma, Vietnam and China. If Thailand fails to increase its refining capacity, investors will go to these other countries.

Metta said compared to 1992, the cost of refinery construction had risen by more than 50 per cent. Therefore government incentives were essential to help investors ensure their investments were worthwhile.

The Energy Ministry meanwhile expects domestic retail prices to stabilise and not exceed Bt30 a litre after an apparent cooling in the heated exchanges between the United States and Iran.

Caretaker Energy Minister Viset Choopiban said crude oil imports this year would decline by 19 per cent from last year.

He said oil suppliers were producing about 30.4 million bpd while demand was about 29 million bpd. As well, temperatures in the northern hemisphere were rising, reducing the demand for heating energy and that should lower the demand for diesel, while the US's oil reserves continued to remain at a normal level.

"Domestic oil prices should be stable for a while, and retail prices should not exceed Bt30 per litre," Viset said.

Thailand's oil demand continued to drop, and that was particularly notable in April when consumption was down by 9 per cent year on year to 52 million litres per day.

Premium petrol consumption was down 3 per cent year on year from last April.