Tiraphot Vajarabhaya, chairman of Shell Companies of Thailand, said the marketing margin of petrol stations must be Bt1.50 to Bt2 per litre, not Bt1.10 to Bt1.20 as at present, due to higher operating costs.

"Retailers have delayed investment to expand stations or improve their operations, due to the low marketing margin in the past few years," he said.

"Notably, in 2006, the margin was only 60 to 70 satang per litre. If the situation remains this way, more retailers could flee from Thailand, following Jet [ConocoPhillips] and Q8 [Kuwait Oil]."

In backing up their proposal for higher margins, retailers referred to the study jointly completed by the Energy Policy and Planning Office, the Petroleum Institute of Thailand and oil firms. The study said petrol stations' margin must be at least Bt1.50 to Bt2, otherwise profits would be too small to cover operating costs.

Since oil prices spiked in 2005, the largest operator PTT has been viewed as a major tool to delay price increases at the pumps. Other companies could not take a lead or they would lose market share. Oil retailers recognised that PTT was selling fuel at a loss, which could be subsidised by profits from other businesses in the group.

Any increase in the margin would put further pressure on retail oil prices, which are expected to increase further soon amid rising demand for petrol in the United States and Europe.

Energy Minister Piyasvasti Amranand insisted yesterday that the state had never ordered PTT to delay a price increase and in this free market all retailers could raise their margins to the point that allowed them to compete efficiently.

Tiraphot said retail prices could be jacked up again this week, raising the octane-95 petrol price above the Bt30-per-litre threshold. However, he said the price should not be hiked to Bt35, otherwise domestic demand would fall considerably.

Meanwhile, Tiraphot said the government should scrap the sale of octane-95 petrol this year so that oil companies could focus more on the sale of gasohol.

He added that the number of old vehicles that could not use gasohol had declined from 300,000 to 15,000. If octane-95 petrol were scrapped, Shell stood ready to stock more gasohol at its stations.

The company has about 700 petrol stations nationwide, of which only 50 to 60 offer gasohol.

"We try to provide more gasohol at our stations, but the problem is we have a limited number of oil tanks," Tiraphot said.

In delaying the end of octane-95 petrol sales, Piyasvasti said earlier that there were around 100,000 vehicles that would not support gasohol consumption. He also said petrol stations should sell both gasohol and octane-95.

Chalida Ekvitthayavechnukul

The Nation