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Published on April 1, 2008

Oil retailers have accumulated substantial losses, because domestic retail prices have been lagging behind global oil prices.

PTT has lost Bt1.6 billion so far in the first quarter and Shell Bt400 million.

PTT will raise its retail prices today, following a new spike in global oil prices to near-historic levels. Its retail fuel prices will go up 50 satang a litre to match those of other retailers, whose prices were raised last Friday.

The decision came as oil prices remained high. yesterday, Dubai crude oil stood at US$98.23 (Bt3,100) per barrel, while oil futures rose to $105.30 a barrel in Singapore.

Oil expert Manoon Siriwan told a seminar yesterday that oil futures were expected to reach $120 a barrel in the next week or two from speculation, while in the next year or two, average crude-oil prices could be as high as $150.

"If retail prices were in line with global rates, premium petrol would now be Bt35 or Bt36 per litre, with diesel at Bt32," Manoon said, adding that because domestic prices were lower than market rates, the entire retail oil business could rack up more than Bt4 billion in net losses like it did last year.

He said that in times of high oil prices, the government should let product prices move in line with market mechanisms. Intervention is possible but should be brief; otherwise, the public will demand intervention whenever oil prices accelerate, which would hurt small players in the retail oil industry.

"While consumers won't understand the need to save energy, intervention will hurt major players in the long run," he said.

PTT said its efforts to delay domestic price hikes had cost it more than Bt1.6 billion in retail oil-business losses.

Senior executive vice president Chaivat Churitti said because oil prices were still rising, the marketing margin for service stations was now only 8 satang a litre on average, meaning PTT needed to shoulder a loss of Bt1.42 per litre, or about Bt30 million a day.

Shell Thailand chairman Thirapot Vajrabhaya said his company's net loss of Bt400 million from its retail business in the first three months of the year would affect its investments, particularly in the opening of new service stations.

Shell needed to introduce new products to avoid indirect price controls by large players and reduce its transportation and service-station operating costs.

The Nation