• 
• 

Published on February 28, 2008

Oil retailers, led by PTT, decided to hike prices by 40 satang a litre with effect from today. The decision was announced early yesterday, but changed in the afternoon. Finally, it was maintained by the end of the day.

Diesel will hit a record Bt29.94, while 95-octane petrol will increase to Bt33.59 per litre. However, the latter remains lower than the Bt33.69 it reached on January 8.

On inflation concerns, the Monetary Policy Committee decided to maintain its policy rate at 3.25 per cent. It realised the spread between US and local rates would spur further capital inflows and strengthen the baht even more against US dollar.

As global investors dumped US dollars on fears of a further weakening, and switched to the commodity markets, oil and gold hit records. Dubai crude oil yesterday fell 22 cents to US$92.13 (Bt2,970) a barrel but crude futures for April delivery gained 24 cents to $101.12 a barrel on the New York Mercantile Exchange, midday in Singapore.

Gold in London surged to a record high of $964.99 per ounce in morning trade. The previous record was $953.91 on February 21. Domestic gold prices hit a record Bt14,900 per baht, which is equivalent to 15 grams.

Gold Traders Association president Jitti Tangsithpakdi said yesterday transactions  this year were expected to drop between 50 per cent and 60 per cent, due to rising prices and low purchasing power.

The price of gold ornaments hit a new high yesterday, reaching Bt14,900 a baht, while gold bar touched Bt14,500.

 "It is difficult for the price to soften in light of the US economic slowdown and surging oil prices, which boost demand in the global market," he said.

PTT president Prasert Bunsumpun said with refined petrol and diesel as high as $108 and $116 a barrel, retailers were raking up losses of at least Bt1 for every litre of oil sold.

Delaying increases to the last minute, PTT has suffered retail losses for four consecutive years since 2005, from Bt3.6 billion that year to Bt2.9 billion in 2006 and Bt2.9 billion in 2007. The 2008 loss is estimated to be at least Bt2 billion, senior executive vice president Chaivat Churitti said.

"We don't know if the delay is right or wrong. We just try to minimise the impact on consumers already suffering from higher costs of living. Yet, this leads many to believe our action will drive some service stations out of business and that we will monopolise the business," Chaivat said.

He said delays in price increases were vital, particularly for diesel, which, if raised above Bt30 a litre, could have wide impact. If market mechanisms are allowed to play, diesel will be Bt33 a litre, while 95-octane will be Bt34.89, he said.

PTT's decision forces other retailers to suffer losses. While PTT can subsidise its losses with gains from refineries, others do not have that luxury.

PTT is measuring sales at some 200 service stations. While 150 could boost daily sales from less than 200,000 litres to 350,000 litres, the remaining 50 could be shut. At present, PTT operates 1,197 service stations, 40 per cent of the country's total.

Energy officials will next week discuss the recent spikes in global oil prices.

"Retail oil prices must reflect global prices. However, they must not be adjusted without a reason, or adjusted to exorbitantly widen profit spreads," Energy Minister Poonpirom Liptapanlop said.

The matter will be tabled at the next National Energy Policy Board meeting.

Business Reporters

The Nation