Shell escapes negative impact from leading price increases

While admitting its sales volume had dropped when its retail prices were lower than others, particularly market leader PTT, Viboon Pungprasert, fuel-development manager at Shell, said consumers understood the increases were unavoidable, given persistent spikes in global oil prices.

"One market survey shows motorists pay most attention to a service station's location or accessibility. Trailing behind are services and prices," said Viboon.

As such, Shell will concentrate further on upgrading services, fuel quality and convenience of access to its service stations.

"So far, our sales volume has not changed much," said Viboon, referring to the past month.

Shell is now the second-largest retailer, with about 570 stations.

Last year, it announced plans to spend more than Bt1 billion to upgrade stations and boost sales, a move aimed at raising its market share to 18 per cent in two years, from 16.2 per cent now. It has been about a month since Shell took the lead in raising domestic prices after complaints that market leader PTT, which operates about 1,200 service stations, had put off price hikes so long that retailers were hurting. In the lapse time, PTT saw diesel sales volume rise to 50 million litres a day, from 30 million when its diesel price was equal to others.

PTT said it had delayed so long in order to avoid pushing an additional burden onto consumers facing rising overall living expenses.

However, other retailers complained that PTT, whose retail oil business lost about Bt4 billion last year because of its pricing curb, cross-subsidised that loss with gains from its refining operations. So far this year, Shell Thailand has recorded about Bt400 million in losses.

Despite complaints, Shell has no plans to pull out of Thailand.

"We're still looking to buy up new stations if the opportunity arises. With two or three years of losses, we can take that. We don't expect the business to post losses for 20 years. Right now, we occasionally lose, but on average it should be okay," said Viboon. Shell posted no profit from its retail oil business last year.