Oil Fund: Thai Govt Diving Into Deep Well Of Trouble

[webfact]

OIL FUND

Govt diving into deep well of trouble

By WATCHARAPONG THONGRUNG

THE NATION

The Pheu Thai-led government hailed the cut in Oil Fund levies last week as a triumphant stroke to stem the soaring cost of living.

But in return for a psychological boost to consumer confidence and the party's popularity, the government is diving into a deep well of trouble, as the move is not only sending ripples through the energy and agricultural sectors, but also giving the public doubts about the country's commitment to renewable energy.

Friday's decision by the National Energy Policy Council to lower the contributions to the Oil Fund from the sale of three products - 95- and 91-octane petrol and diesel - immediately reduced fuel prices. On Saturday, the petrol products with the MTBX additive, which must be imported, were only 70 satang more expensive than those mixed with locally produced ethanol.

The slim gap is encouraging consumers to switch back to MTBX-mixed products in the belief that the conventional fuels last longer than those with easy-to-evaporate ethanol.

As part of the alternative energy policy, since 2007 Thailand has encouraged both consumers and petrol retailers to migrate to ethanol types, called gasohol, to reduce imports. With assurances from auto companies of no engine damage, demand for gasohol products had risen to about 12 million litres a month in July against about 7 million litres for MTBX types.

Filling stations in the past years have reduced the number of pumps dispensing MTBX fuel, while more gasohol with higher ethanol content is being promoted.

The narrow gap is changing the entire picture, and higher demand for MTBX-mixed products is worrying station operators who are about to totally scrap the sale of MTBX types. Bangchak Petroleum is one of them. To maintain market share, it needs to increase its MTBX-type pumps.

Worse, Bangchak has invested in an ethanol plant. It is one of over 20 ethanol producers who will get hurt from the latest change in policy. As of last week ethanol consumption was 2.4 million litres a day and the excess output - averaging 50 million litres per year - is exported as industrial ethanol. Ethanol consumption will decline as demand for MTBX fuels increases.

To survive, PTT and Bangchak today are dropping gasohol prices by 60 satang per litre, which will widen the spread between gasohol and petrol prices.

Praphon Wongtharua, director of the Biofuel Development Bureau, said that exporting more would be the only |choice for ethanol producers.

Krisda Monthienvichienchai, president of Mitr Phol, a major producer, said small players would stop operating their plants, while the big producers can increase exports. Cassava growers would also be hit, as demand from tapioca-based ethanol plants helped push up the agricultural product's price in recent years.

The suspension of the levies is costing the Oil Fund Bt6.16 billion a month in lost income, and plans are underway to seek loans or issue bonds to raise Bt3.8 billion to Bt4 billion a month. Now, the Oil Fund is allowed to borrow a total of Bt20 billion.

This is besides about Bt3 billion that the Energy Ministry has to compensate petrol retailers for their stocks of petrol and diesel prior to the suspension.

The Excise Department is proposing a package to make gasohol products more attractive.

Amid growing complaints from petrol retailers, this week Energy Minister Pichai Naripthaphan will meet state agencies to find ways to help retailers. All along, he insisted that despite the latest measure, the government would give priority to the long-term promotion of renewable energy and the positioning of Thailand as an Asean hub for energy plants.

Although diesel is now cheaper, it remains to be seen when consumers will benefit from lower transportation costs.

Applauding the suspension are mainly motorcycle owners, numbering more than 10 million, and farmers who have to run their equipment on MTBX petrol. Beneficiaries include car owners who want to power their cars with the expensive fuels.

Through this measure, which was not engineered to help only the poor, Pheu Thai has secured political popularity only to be engulfed by bigger problems.

-- The Nation 2011-08-30

[siampolee]

Thailand , '' The Hub of Money Pits.

[janverbeem]

What's the point of subsidizing a product that is more expensive to produce,delivers less performance and makes other more neccessary products ( food) more expensive because of the production of it?

[ExpatOilWorker]

What's the point of subsidizing a product that is more expensive to produce,delivers less performance and makes other more neccessary products ( food) more expensive because of the production of it?

You are a true friend of the oil industry......thanks.

[janverbeem]

What's the point of subsidizing a product that is more expensive to produce,delivers less performance and makes other more neccessary products ( food) more expensive because of the production of it?

You are a true friend of the oil industry......thanks.

Not a friend,just a realist.

[siampolee]

Janverbeem.

""Oill'' agree with you sir or madam.

Edited August 30, 2011 by siampolee

[janverbeem]

^ Do you recall the price of foodgrade oil products about 6 months ago,just before the stopped producing B5 bio-diesel?

[hanuman2543]

Energy prices should reflect the real costs and shouldn't be subsidiesed to please certain groups. As long as many carowners in Th leave their engines running when parking/shopping to run the ac, energy is not expensive enough. When energy is too cheap nobody will start to save

Edited August 30, 2011 by hanuman2543

[rakman]

I hope MTBX isn't like MTBE. Both are used as oxygenates, like ethanol (which is dubious as "improving" emissions). MTBE has been pretty much banned in the US (mandated by the EPA even though it was listed as a class A carcinogen. Funny isn't it?) It was found to migrate into water at the drop of a hat.

If I had to use MTBX or Ethanol, I'd go for the ethanol, but really given the choice I'd choose just plane gasoline.

[virtualtraveller]

Sadly, most voters only notice the obvious, this is purely a populist measure to gain quick political capital, certainly the public will believe that the previous govt were cheating them. Prices won't go down, oil prices are predicted to rise towards the end of the year as winter sets in, the fund will be depleted and oil prices will rise higher than they were last month. Thus inflation spikes. It's more subtle, people don't notice their lives are getting expensive, but it will be blamed on the world recession not the govt policy. All this populist flip-flopping is terrible for sustainable policies like eco-friendly fuels.

As it stands, I find that the ethanol mix fuels give me 20% efficiency, so unless they are 20% cheaper, why would I use them?

[Bagwan]

I hope MTBX isn't like MTBE. Both are used as oxygenates, like ethanol (which is dubious as "improving" emissions). MTBE has been pretty much banned in the US (mandated by the EPA even though it was listed as a class A carcinogen. Funny isn't it?) It was found to migrate into water at the drop of a hat.

If I had to use MTBX or Ethanol, I'd go for the ethanol, but really given the choice I'd choose just plane gasoline.

I think most planes (aeroplanes that is) run on paraffin or something like it. Isn't AVGAS something of the past?

[hammered]

What's the point of subsidizing a product that is more expensive to produce,delivers less performance and makes other more neccessary products ( food) more expensive because of the production of it?

Its all about money and politics

[spidermike007]

I am more convinced than ever, that all of the panic, and threats of debt are democrat party politics as usual. Have you noticed that the price of gas depends on the cost of oil, on

a daily basis. Up until about 6 months ago, this price used to fluctuate daily, and if oil dropped, the price of gas was expected to drop, nearly in proportion to that drop. That has not

happened for months now. The cost of crude dropped from about $110 per barrel, to about $87 today, for NYMEX crude. That is nearly a 20% drop. Gas here did not drop at all. So

the slush fund that the agency was keeping will no longer be as large. This drop in crude prices represents about the drop the Thai people should have been accorded anyway, has

the democratic puppet masters seen fit to do the right thing to begin with. All this govt. is doing is giving back to the Thai people what they deserved anyway. Lowering the cost of

commodities is a positive thing. If you are so hung up on the environment, and preserving it, show us some examples of what you are doing on a daily basis, and stop preaching to

us about the virtues of this higher tax nonsense. That is all it is.

[Seri]

"Lowering the cost of commodities is a positive thing"

Diesel prices went down 10% but gasohol, which is what most non-diesel cars use, hasn't changed.

Lowering the price of non-gasohol fuels, which are used by motorcycles, very old or high-end cars, is not what I call lowering the cost of commodities.

I call that good PR.

[Crushdepth]

I am more convinced than ever, that all of the panic, and threats of debt are democrat party politics as usual. Have you noticed that the price of gas depends on the cost of oil, on

a daily basis. Up until about 6 months ago, this price used to fluctuate daily, and if oil dropped, the price of gas was expected to drop, nearly in proportion to that drop. That has not

happened for months now. The cost of crude dropped from about $110 per barrel, to about $87 today, for NYMEX crude. That is nearly a 20% drop. Gas here did not drop at all. So

the slush fund that the agency was keeping will no longer be as large. This drop in crude prices represents about the drop the Thai people should have been accorded anyway, has

the democratic puppet masters seen fit to do the right thing to begin with. All this govt. is doing is giving back to the Thai people what they deserved anyway. Lowering the cost of

commodities is a positive thing. If you are so hung up on the environment, and preserving it, show us some examples of what you are doing on a daily basis, and stop preaching to

us about the virtues of this higher tax nonsense. That is all it is.

Yes you are right, it was an plot by the Illuminati and their Democrat Allies, honestly, how people live with such a rabid one-eyed view of the world is beyond me...

Do you not understand that the 'slush fund' was not a tax but used to buffer fuel prices against market movements? Getting rid of it means you get cheaper fuel now, but there is no more shelter from sudden market movements and fuel will be more expensive when the scheme runs out of money, which is in JANUARY. The money you are "saving" now is money you have to pay back in several months time. If you look at it from a six month time frame the government hasn't given anything back to the "Thai People", they just removed the buffer mechanism. Woo hoo, Comrade.

And guess who will get screwed the hardest next time there's a problem in the Middle East? Low income earners. But who cares, policies don't need to be sensible they just need to be populist.

Edited August 30, 2011 by Crushdepth

[OzMick]

Sadly, most voters only notice the obvious, this is purely a populist measure to gain quick political capital, certainly the public will believe that the previous govt were cheating them. Prices won't go down, oil prices are predicted to rise towards the end of the year as winter sets in, the fund will be depleted and oil prices will rise higher than they were last month. Thus inflation spikes. It's more subtle, people don't notice their lives are getting expensive, but it will be blamed on the world recession not the govt policy. All this populist flip-flopping is terrible for sustainable policies like eco-friendly fuels.

As it stands, I find that the ethanol mix fuels give me 20% efficiency, so unless they are 20% cheaper, why would I use them?

I assume that you meant 20% LESS efficiency, but I suggest whichever method you are using to calculate it is faulty. If you are using E20 with 20% ethanol and that ethanol had absolutely no calorific value you may well be correct. As that is NOT the case, your calculation is incorrect.

Ethanol will always give a lower energy output as it has less carbon per unit, with a single Carbon-Carbon bond. These are where the majority of the energy derives. Petroleum has the complex 6 carbon rings with both single and double Carbon=Carbon bonds which gives a much higher energy output.

Ethanol is similar to natural gas in its lower energy and lower polution, mainly due to the absence of sulphur.

[spidermike007]

I am more convinced than ever, that all of the panic, and threats of debt are democrat party politics as usual. Have you noticed that the price of gas depends on the cost of oil, on

a daily basis. Up until about 6 months ago, this price used to fluctuate daily, and if oil dropped, the price of gas was expected to drop, nearly in proportion to that drop. That has not

happened for months now. The cost of crude dropped from about $110 per barrel, to about $87 today, for NYMEX crude. That is nearly a 20% drop. Gas here did not drop at all. So

the slush fund that the agency was keeping will no longer be as large. This drop in crude prices represents about the drop the Thai people should have been accorded anyway, has

the democratic puppet masters seen fit to do the right thing to begin with. All this govt. is doing is giving back to the Thai people what they deserved anyway. Lowering the cost of

commodities is a positive thing. If you are so hung up on the environment, and preserving it, show us some examples of what you are doing on a daily basis, and stop preaching to

us about the virtues of this higher tax nonsense. That is all it is.

Yes you are right, it was an plot by the Illuminati and their Democrat Allies, honestly, how people live with such a rabid one-eyed view of the world is beyond me...

Do you not understand that the 'slush fund' was not a tax but used to buffer fuel prices against market movements? Getting rid of it means you get cheaper fuel now, but there is no more shelter from sudden market movements and fuel will be more expensive when the scheme runs out of money, which is in JANUARY. The money you are "saving" now is money you have to pay back in several months time. If you look at it from a six month time frame the government hasn't given anything back to the "Thai People", they just removed the buffer mechanism. Woo hoo, Comrade.

And guess who will get screwed the hardest next time there's a problem in the Middle East? Low income earners. But who cares, policies don't need to be sensible they just need to be populist.

When oil prices go up, the cost of gas will too, just like it has in the past. There will be no massive deficit. Since when is the lowering of a tax a bad thing?

[MILT]

I am more convinced than ever, that all of the panic, and threats of debt are democrat party politics as usual. Have you noticed that the price of gas depends on the cost of oil, on

a daily basis. Up until about 6 months ago, this price used to fluctuate daily, and if oil dropped, the price of gas was expected to drop, nearly in proportion to that drop. That has not

happened for months now. The cost of crude dropped from about $110 per barrel, to about $87 today, for NYMEX crude. That is nearly a 20% drop. Gas here did not drop at all. So

the slush fund that the agency was keeping will no longer be as large. This drop in crude prices represents about the drop the Thai people should have been accorded anyway, has

the democratic puppet masters seen fit to do the right thing to begin with. All this govt. is doing is giving back to the Thai people what they deserved anyway. Lowering the cost of

commodities is a positive thing. If you are so hung up on the environment, and preserving it, show us some examples of what you are doing on a daily basis, and stop preaching to

us about the virtues of this higher tax nonsense. That is all it is.

Yes you are right, it was an plot by the Illuminati and their Democrat Allies, honestly, how people live with such a rabid one-eyed view of the world is beyond me...

Do you not understand that the 'slush fund' was not a tax but used to buffer fuel prices against market movements? Getting rid of it means you get cheaper fuel now, but there is no more shelter from sudden market movements and fuel will be more expensive when the scheme runs out of money, which is in JANUARY. The money you are "saving" now is money you have to pay back in several months time. If you look at it from a six month time frame the government hasn't given anything back to the "Thai People", they just removed the buffer mechanism. Woo hoo, Comrade.

And guess who will get screwed the hardest next time there's a problem in the Middle East? Low income earners. But who cares, policies don't need to be sensible they just need to be populist.

I am not sure crushdepth that you are seeing the picture. Spidermike007 is pretty much dead on. Point being is that and I quote "It is no great measure of health to be well adjusted to a profoundly sick society" As events in the middle east continue and will continue the price of oil will be heading to new heights. This issue is not about Dems it is about a very bad policy that should not have been enacted. My brother in law is a {Pardon Thaskin Party) supporter and I love him greatly! But the naivety is simply mind boggling. He says to me look the price of fuel has gone down because of the new Government. I want to puke! They are fulfilling promises that were not thought out, and to keep on track getting her brother back home unscathed the long term effects of their policies will have devastating affects on this country as a whole.

[janverbeem]

just found this article in the old box,it dates from November 2007.

http://www.tint.or.th/en/news/2007/nov_02.html

Thaksin's poor judgement and miscalculations and his penchant for populist policies should serve as a lesson as to why Thailand cannot fall into the trap of populism again.

Thaksin first implemented oil subsidies during the war in Iraq and reintroduced them again on January 10, 2004. He was forced to abandon the wrong-headed policy in the first quarter of 2005, by which time the Oil Fund was almost Bt100 billion in the red.

At the height of this folly, Thaksin used taxpayers' money to provide subsidies of between Bt3 to Bt5 per litre.

[lannarebirth]

just found this article in the old box,it dates from November 2007.

http://www.tint.or.t...007/nov_02.html

Thaksin's poor judgement and miscalculations and his penchant for populist policies should serve as a lesson as to why Thailand cannot fall into the trap of populism again.

Thaksin first implemented oil subsidies during the war in Iraq and reintroduced them again on January 10, 2004. He was forced to abandon the wrong-headed policy in the first quarter of 2005, by which time the Oil Fund was almost Bt100 billion in the red.

At the height of this folly, Thaksin used taxpayers' money to provide subsidies of between Bt3 to Bt5 per litre.

Yes, Thaksin subsidized without collecting the levy when oil prices were low. He failed to create price stability, he just switched to borrowing the money instead. Wholly unsustainable and it took a while for the subsequent governments to overcome his folly. I think he hates Thai people, as so many posters here seem to.

Edited August 31, 2011 by lannarebirth

[janverbeem]

just found this article in the old box,it dates from November 2007.

http://www.tint.or.t...007/nov_02.html

Thaksin's poor judgement and miscalculations and his penchant for populist policies should serve as a lesson as to why Thailand cannot fall into the trap of populism again.

Thaksin first implemented oil subsidies during the war in Iraq and reintroduced them again on January 10, 2004. He was forced to abandon the wrong-headed policy in the first quarter of 2005, by which time the Oil Fund was almost Bt100 billion in the red.

At the height of this folly, Thaksin used taxpayers' money to provide subsidies of between Bt3 to Bt5 per litre.

Yes, Thaksin subsidized without collecting the levy when oil prices were low. He failed to create price stability, he just switched to borrowing the money instead. Wholly unsustainable and it took a while for the subsequent governments to overcome his folly. I think he hates Thai people, as so many posters here seem to.

Oops,and what do I read here,isn't that a repeat of history?

http://www.thaivisa.com/forum/topic/493531-halt-to-oil-levy-approved-thailand/

With regard to the expected loss of Bt6.16 billion from levy deductions to the Oil Fund, it is worth noting that the fund has a current outstanding balance of Bt1.06 billion. The expected cash flow to the fund is Bt15 billion, which is sufficient to subsidise gasohol, NGV and LPG to January of next year. After that period, the Energy Fund Administration Institute (EFAI) will consider borrowing from financial institutions or issuing government bonds for an amount of Bt20 billion, which will be used to continue subsidies and will need to be approved by the EPPO.