• 
• 

Published on November 3, 2007

 The Energy Ministry will on Monday cut the contribution from oil retailers to the Oil Fund by 40 satang per litre for all grades of fuel, hoping to cushion consumers against crushing crude prices.

The decision, despite strong resistance earlier this week, came as finished oil-product prices in Singapore shot up by more than US$4 (Bt134) a barrel on Thursday.

The move, while allowing retailers to put off price hikes, will also delay by two weeks the full repayment of the Oil Fund's Bt5.572-billion debt incurred from subsidising oil prices in the 19 months from January 2004 to July 2005.

"Reducing the contribution is not equivalent to a price subsidy. We aim to alleviate short-term impacts," Energy Minister Piyasvasti Amranand said yesterday.

The levy reduction does not guarantee that oil prices will not go up in the future, he said.

"How long this measure will stay depends on global conditions. If global oil prices maintain an upward trend, we'll need to let retail prices flow along with the market."

The lower contributions to the Oil Fund will also lead to a change in the co-financing of rail projects, but this should not disrupt their construction, he said.

The measure was announced after the sharp spike on Thursday. Dubai crude oil jumped $5.27 to $85.82 a barrel. Finished petrol in Singapore also soared $4.76 to $98.32 a barrel while diesel skyrocketed $4.72 to $105.25. The increases will force oil-retailers to raise their prices as they are already losing 50 satang per litre.

Anusorn Sangnimnuan, president of Bangchak Petroleum, said earlier this week that retail diesel should have been Bt30 a litre even when the refined level is below $100.

An increase in diesel prices would put more pressure on manufacturers who have tried in vain to raise their prices to cover escalating production costs. Diesel is the main fuel used in transportation. Manufacturers said yesterday that they might not be able to hold off the increases until the end of this year as directed by the Commerce Ministry.

Oil-retailers have been diverting to the Oil Fund Bt1.50 for every litre of diesel sold, 70 satang for biodiesel, Bt4 for 95-octane petrol, Bt3.70 for 91-octane, 70 satang for 95 gasohol and 20 satang for 91 gasohol.

On Monday the rates will drop to Bt1.10, Bt3.60 and Bt3.30 for diesel and petrol. However, the Oil Fund will need to pay retailers 20 satang per litre for 91 gasohol, which would deplete the Oil Fund by Bt800 million a month.

Piyasvasti admitted that the lower contribution would require the Energy Ministry to adjust the applications of the Oil Fund. Earlier it planned to slash retail oil prices immediately by 50 satang per litre in the middle of next month after the debt is cleared. Yesterday's decision means retail oil prices could be lowered only 10 satang.

Light, sweet crude for December delivery on Thursday fell $1.04 to settle at $93.49 a barrel after hitting $96.24, a new trading high.

Piyasvasti said yesterday morning that if prices dropped further the measure might be unnecessary.

However, oil prices rose yesterday after the previous session's decline prompted fresh buying amid expectations that crude futures would continue to test new records because of tight supplies. The prices went to $93.58 in Asian electronic trading in Singapore.

Business Desk

 The Nation