Oil Price Rises Hit Consumers By 20%

[cojones]

Oil surge will hit consumers hard: NESDB

Published on October 20, 2004

Skyrocketing oil prices are expected to hit consumers hard, eventually reducing their purchasing power by 20 per cent, according to an official at the National Economic and Social Development Board (NESDB).

The comments came as the government increased petrol prices by another Bt0.60 a litre, from today. It raises the price of octane-91 to Bt21.59 a litre and octane-95 to Bt22.39 a litre. Transport costs have already risen, in spite of the government’s continuing fuel subsidies, notably for diesel fuel, as have the price of other consumer goods – particularly foods and construction materials, said the official, who asked not to be named.

“We expect the purchasing power of the people will be reduced by 20 per cent,” the official said.

Thailand is not alone in reeling from the effects of high fuel prices. Investment bankers Morgan Stanley and JP Morgan on Monday cut their estimates for global economic growth, citing high energy costs. Both predicted a worldwide slowdown in consumer demand.

With the health of the economy deteriorating, the government faces a difficult decision on when to end its diesel fuel subsidy.

The Thaksin administration has kept the price of diesel at an artificially low Bt14.59 per litre. The subsidy costs the government Bt7.05 per litre – or a whopping Bt352 million a day.

As of October 19, the oil subsidy had cost the government Bt41.98 billion since it started in January. Of this amount, Bt34.98 billion has been used to subsidise diesel prices and the rest was used for petrol subsidies, which ended in September.

Many pundits say the decision to subsidise diesel prices is a purely political decision and they predict it will last until March 2005, or right after the general election. By that time, the government’s subsidy tab could exceed Bt100 billion.

The oil subsidy policy could also harm the country’s fiscal discipline and the national trade balance.

The other problem is moves by the government to save energy have failed to cut fuel consumption.

In the first nine months of the year, oil consumption rose sharply to the point where the country looks set for a trade deficit this year. Diesel consumption rose 10 per cent during the period, while sales of diesel-driven pickups are on the increase.

Senior officials at the Energy Ministry met yesterday to discuss the crisis after crude oil prices broke US$55 (Bt2,274) per barrel on the world market. Many officials expressed concern about the latest rise. They are due to submit a full report on the situation to Energy Minister Prommin Lertsuridej for discussion today.

Watcharapong Thongrung

The Nation

[Upcountry]

I wish the goverment would push hard for the import of hybrid cars and trucks. I know many won't be available for a year or more, but some are available in places like the US today.

If the Thai government both removed taxes and tarrifs on hybrids and encouraged car makers to start building hybrids here, it would be a big big step toward reducing Thailand's dependence on oil.