Thai Govt Mulls Ways To Control Diesel Price

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Govt mulls ways to control diesel price

By Watcharapong Thongrung

The Nation

The Energy and Finance ministries will brainstorm how to keep diesel prices under control next week, as renewed global price spikes are depleting the Oil Fund's Bt5 billion subsidy budget.

"Price restrictions are a temporary measure," said Energy Minister Wannarat Charnnukul. "Whether the subsidy scheme is reviewed depends on economic conditions, and this needs to be discussed with the Finance Ministry."

Following fresh increases in subsidies to B3 and B5 diesel approved yesterday by the Energy Policy Administration Committee, the subsidies on B3 and B5 diesel stand at Bt3 and Bt3.55 per litre, respectively.

Daily subsidy costs will rise from Bt148 million to Bt164.7 million at a time when just Bt1.56 billion of the Oil Fund's Bt5 billion budget remains. This will last eight days if global oil prices do not ease.

Pissawan Achanapornkul, chair of Shell Company of Thailand, said the higher biodiesel price, soon to rise to Bt67 per litre, is depleting marketing margins.

Shell is ready to cancel the forthcoming sale of B5 diesel at 570 stations, she said, noting that the government planned to delay compulsory sales of B5 diesel due to palm oil shortages anyway.

Pissawan suggested the government restrict subsidies to certain sectors such as transport and allow diesel prices to fluctuate in line with market conditions. She also suggested a single diesel grade containing 35 per cent biodiesel, which would increase flexibility.

Diesel prices are being kept below Bt30 per litre amid recent spikes in global oil prices. The government fears that allowing diesel to exceed Bt30 could lead to spiralling inflation.

But while oil prices are kept low, other input costs are increasing and the prices of many goods could rise once the Commerce Ministry's freezing scheme ends after next month.

The Bank of Thailand forecasts headline inflation this year of 2.5-4.5 per cent, boosted by domestic demand.

Crude oil prices are climbing towards the US$100 per barrel mark. Driving the rise is the betterthanexpected economic performance of the United States, the world's biggest consumer of crude.

Continuing protests in Egypt have raised concern among investors that shipments through the Suez Canal could be disrupted.

Analysts also attribute diesel price rises to higher palm oil costs. It is compulsory that diesel contains at least 3 per cent palmoilbased biodiesel.

-- The Nation 2011-02-05

[Tanaka]

Maybe the Ministries should be informed that diesel price is already well above 30bt/Lt.

[MaiChai]

I drove into a PTT the other day and they said they were out of B5. Then they told me the B5 was the same as regular diesel and I though, wow, <deleted>! So B5 now is more expensive than regular diesel? Talk about miss management. Can I say "I told you this would happen"?

There is definitely something serious flawed with using food stuffs to produce petrol/diesel. Firstly Thailand runs out of sugar (sugar cane diverted to producing ethanol), then it runs out of palm oil (palm oil diverted from food to diesel production). It really points to the whole strategy to use biofuels instead of crude oil is going to upset the economics and food chain!!! Well it doesn't take a genius to work that out, and guess what, it happened!

Its easy to say something after the fact, but this was predictable. It would have made more sense to follow what Westerner countries are trying to do: educate people on using less oil, look for renewalable energy solutions (wind farms/wave power/nuclear), try and persuade people to run more fuel efficient vehicals (smaller/hybrids), eventually look for alternatives for transport (battery driven/use public transport more/build more electric trains).

Edited February 5, 2011 by MaiChai