Oil Fund hike prevents retailers from cutting prices

Oil retailers are now barred from cutting retail oil prices following yesterday's decision by the Energy Ministry to raise their contribution to the Oil Fund 40-60 satang a litre.

The move is effective immediately.

The contribution from petrol sales is raised by 60 satang a litre, gasohol 40 satang and diesel 50 satang.

An oil-industry source said since the marketing margin remained at Bt1.70 to Bt2 per litre yesterday, retailers had considered slashing their prices but were now prevented from doing do. Global oil prices are expected to continue weakening, with oil-contract sell-offs during last weekend's long holiday in the US.

The source said that while the decision would not benefit consumers, the government should address other problems, such as the high price of ethanol, which keeps gasohol expensive.

Energy Policy and Planning Office director-general Viraphol Jirapraditkul said the contribution was hiked following the drop in global oil prices. The move will raise the Oil Fund's daily income by Bt33 million, from Bt300,000 a day earlier.

"The higher contribution will be used to cushion the burden from waiving excise tax. The Oil Fund has yet to raise the contribution another 80-120 satang per litre to end the excise tax subsidy," he said.

Sivanan na Nakorn, director of the Energy Fund Administration Institute, which manages the Oil Fund, said the higher contribution would boost the fund's liquidity. Given expectations the global economy could recover in the next year or two and that crude-oil prices could surpass US$100 (Bt3,400) per barrel, the fund's liquidity must be maintained, because it continues to shoulder a huge subsidy burden, particularly for liquefied petroleum gas.