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Published on November 6, 2007

There is a high possibility that the 95-octane petrol price would be the first to be increased as retailers seek to neutralise their marketing margin, which is on average minus 50 satang per litre, he said.

"If the market leader swiftly decides to raise the 95-octane petrol price, others will follow suit.

"This will widen the price gap between 95 octane and gasohol 95 to Bt3.90 [from Bt3.50] per litre, and increase gasohol 95 sales volume. Eventually, it would help retailers in making a decision whether they should scrap the retail sales of 95 octane," Anusorn said.

The Energy Ministry yesterday decided to slap a 40-satang cut in contributions from the sale of all fuel products, except 95-octane petrol for which the contribution remains Bt4 per litre.

If the premium petrol price is raised, the price gap with gasohol 95 would widen and encourage motorists to switch to the alternative fuel. This is in line with the ministry's plan to promote alternative fuel. It is expected that gasohol consumption will reach 8 million litres a day this year.

Federation of Thai Industries chairman Santi Vilassakdanont said the 40-satang

 

 

 

cut was too small and manufacturers would rather have expected a reduction of Bt1 per litre.

"The 40-satang cut cannot help much, psychologically or economically. But a Bt1 cut would really help, particularly those in the transportation sector," he said.

"Retailers will think for themselves whether they'll increase the premium petrol price, but I believe that they will adjust its price alongside the prices of other fuel products," said Energy Minister Piyasvasti Amranand.

"Meanwhile, this measure will be the trigger point to tell retailers whether they should continue selling the premium fuel, with the possibility of lower profits or even a loss."

PTT executive vice president Vithaya Wangchitrarak said the company would monitor oil prices on a daily basis. At present, it is not known whether retail prices need to be increased, or when.

He added that if gasohol demand rises sharply, PTT was ready to reduce the sales volume of 95-octane premium petrol.

Piyasvasti admitted that while the contribution cut would delay a hike in retail oil prices, the continued rise in world oil prices could force retailers to raise their prices. He was optimistic that global oil prices could fall if demand eased in China and Mexico, suffering from the aftermath of a hurricane, resumes oil production.

He insisted that the reduction measure was necessary in the light of irregular increases in global oil prices.

"The [use of the] Oil Fund is a temporary mechanism to alleviate the situation. We have to monitor the situation for a while to know what we should do next. Yet, we have to admit that the Oil Fund is not in a position to do much, with debts of Bt5.57 billion," Piyasvasti said.

The minister said the measure would not affect the planned funding scheme for railway development, as the Oil Fund simply needs one more month to clear its debts and then start amassing capital for such development. The money collected would then match the government's financial needs in funding mega-project construction.

The Oil Fund's debt is now expected to be paid in January, a month after the original deadline of December 17.

The lower contribution as a result of yesterday's cut will reduce inflows by Bt800 million a month.

At present, according to Viraphol Jirapraditkul, director-general of the Energy Policy and Planning Office, the Oil Fund earns Bt4.34 billion a month against monthly expenses of Bt9.9 billion. Bt8.8 billion of the expenses are used to redeem bonds issued to finance past oil subsidies.

It subsidises cooking gas by Bt751 million a month and B100 biodiesel by Bt100 million. Each month, it also pays bond interest of Bt249 million.

Viraphol said under current conditions, retail prices could be raised by Bt1-Bt1.50 per litre.

Despite a US$1.13 (Bt38.40) decrease, light sweet crude for December delivery was $94.80 a barrel in Asian electronic trading on the New York Mercantile Exchange by mid-afternoon yesterday in Singapore.

The Dubai crude-oil price also stayed well above the $80 level, at $84.64 a barrel.

Despite higher oil prices, the National Economic and Social Development Board has maintained its forecast for this year's economic growth and inflation.

The think-tank expects the economy to expand 4-4.5 per cent and inflation to be in a range of 2-2.5 per cent, on the assumption that Dubai crude will average $60-$65 for the year.

Ampon Kittiampon, secretary-general of the state agency, said yesterday that in the first nine months of the year, the average price of Dubai crude was $63.57 a barrel - slightly higher than $62.93 in the same period last year. The retail diesel price averaged Bt24.82 a litre, compared to Bt26.17 last year.

The Nation