Thai Govt Oil-Price Policy Paved With Pitfalls

[webfact]

Oil-price policy paved with pitfalls

By WATCHARAPONG THONGRUNG

THE NATION

The Yingluck administration will have to dig deeper into its pockets if it is determined to keep its fuel price policy, which has drawn a howl of complaints from retailers and environmentalists, going for as long as one year.

Last week's cuts in levies on sales of 95- and 91-octane petrol as well as diesel are slashing monthly contributions to the Oil Fund by Bt6.1 billion. Yesterday's decision by the Energy Policy Administration Committee to widen the price gap between premium petrol and gasohol will cost Bt454 million a month. Energy Minister Pichai Naripthaphan said total contributions from all petrol products will be only Bt10 million a month.

The Oil Fund looks set to borrow soon as its net cash position is only Bt1 billion. Against total assets of Bt16.7 billion, the fund shoulders Bt15.35 billion in liabilities, derived mainly from subsidising sales of natural gas for vehicles and liquefied petroleum gas.

The Oil Fund has the green light to borrow up to Bt20 billion, but with estimated monthly expenses running at Bt3.5-Bt4 billion, the loan limit would be reached within five to six months or sometime early next year.

Regardless of consumers' joy, the government's policy is being watched with concern, especially when it promises to keep fuel prices down for a year.

"It remains unclear what it will do when the excise tax cut on diesel expires at the end of September. Don't forget that thanks to the cut, diesel could stay below Bt30 per litre," said a source from the petrol retailing business.

Extending the excise tax cut of Bt5.30 per litre would hurt government revenue, based on monthly consumption of 51 million litres, he said.

Under Pichai's watch, the ministry shocked the entire industry with the decision to trim levies last week, as the move is expected to produce undesirable consequences. The first was the thin price gap between premium petrol products and gasohol products.

Siam Commercial Bank's research unit said the suspension of levies on the three products would help lower transportation costs and slice headline inflation by 1 percentage point.

However, goods prices would not drop much as businesses are bracing for wage hikes, so this measure will not help core inflation.

In effect, it will widen the premium for 95-octane petrol over gasohol 95 from Bt3.48 per litre to Bt4.55, while the premium for 91-octane petrol and gasohol 91 will grow from B1.43 to Bt2.93. With 20-per-cent ethanol content, E20 will also see its price move to Bt1.90 below gasohol 91's price.

Pichai told reporters that the decision yesterday was meant to show the government's commitment to promoting alternative energy, while lowering fuel prices to ease the cost of living.

Deputy Finance Minister Boonsong Teriyaphirom said the government would not raise fuel excise taxes, as Prime Minister Yingluck Shinawatra believes the government should maintain all types of fuel excise taxes for a certain period to hold down people's daily expenses. The excise taxes should be maintained at the same rates for six months in line with the suspension of Oil Fund levies.

The Cabinet has also endorsed the extension of the diesel excise tax rate at the present level of about 0.0005 satang per litre by another month.

"The government will not touch all kinds of oil and luxury product excise taxes for at least six months and will see what this will do to state revenue," Boonsong said.

Other measures will also be introduced, including energy credit cards for the poor, which will further increase energy subsidies.

Suthep Liamsiricharoen, director-general of the Energy Policy and Planning Office, said cardholders could get discounts, for example, on LPG and fuel.

The next move will deal with the prices of NGV and electricity.

The Thailand Environment Institute said in a paper that for a few benefits, the government is creating a host of new problems with the oil-price policy.

Consumers would not save energy as they are consuming more MTBE-mixed petrol products, so Thailand will witness an increase in greenhouse gases of 1,772 tonnes a day.

The policy contradicts the renewable energy development plan and could affect the future of the environmentally friendly eco-car project, it said. In the end, with higher GHGs, Thailand could also invite non-tariff barriers from importing countries.

-- The Nation 2011-08-31

[siampolee]

Won't be long before Thailand will be going cap in hand to the I.M.F. due to the fiscal irresponsibility of the current manipulated administration .The rich will bear no burden however the poor will pay the bill. All for one man's ego trip and his lust for absolute power,

That" vote for me" incentive payment is going to cost an awful amount of money for the Thai people and Thailand.

Edited August 31, 2011 by siampolee

[marquess]

These fuel price cuts are only benefiting vehicle owners, as I don't see any of the savings being passed on to the consumer, in terms of transportation cost reductions or food price reductions! Or maybe it is too soon.

[slapout]

The week of the election for present government, diesel pump price went up 75 stang in CM (30.74 vs 29.99). Since the new price 26.99, the CM pumps are at 27.74. CM price has been at regulated price, same as Bangkok for the past few years. I know there is some Thai logic in this price adjustment, just as there is for the total petrel price reduction. We just may have to wait for the explanation???

[Cayenne]

Of course the Oil Fund will have to borrow pretty soon to subsidize the LPG prices. Can't have LPG prices go up otherwise you'll have discontent among the taxi drivers and other base PTP supporters.

[OzMick]

Won't be long before Thailand will be going cap in hand to the I.M.F. due to the fiscal irresponsibility of the current manipulated administration .The rich will bear no burden however the poor will pay the bill. All for one man's ego trip and his lust for absolute power,

That" vote for me" incentive payment is going to cost an awful amount of money for the Thai people and Thailand.

Imagine the smile on her face when Pichai drops an energy credit card in her bowl! She could run for PM!

"...... diesel excise tax rate at the present level of about 0.0005 satang per litre........" That's B1 revenue for every 200,000 litres - I am assuming just a legal fiction that excise is being applied and not abandoned, and to keep the government clerks in work of course.

[OzMick]

Of course the Oil Fund will have to borrow pretty soon to subsidize the LPG prices. Can't have LPG prices go up otherwise you'll have discontent among the taxi drivers and other base PTP supporters.

One should be careful using the adjective "base" as it could be taken as one of the older meanings of the word.

1. (obsolete) Of low value or degree.
2. (archaic) Of low social standing or rank; vulgar, common.
3. (archaic) Morally reprehensible, immoral; cowardly.
4. (now rare) Inferior; unworthy, of poor quality.

[SICHONSTEVE]

Won't be long before Thailand will be going cap in hand to the I.M.F. due to the fiscal irresponsibility of the current manipulated administration .The rich will bear no burden however the poor will pay the bill. All for one man's ego trip and his lust for absolute power,

That" vote for me" incentive payment is going to cost an awful amount of money for the Thai people and Thailand.

This will be the elite class in 1 year time!!!!!!!

Seriously though, has anyone got any brains in this government??? I didn;t realise they could do so much damage in such a short time!!!!

They would be better off opening a sweets shop - oh!!! silly me, what am I on about? that is exactly what they have done except they are giving them away free.

I'm trying to be serious but am struggling somewhat. - don't they understand that you are supposed to balance the books. I cannot believe that having been pilloried/warned/castigated about the consequences of their actions they are talking about further subsidies in the pipe-line!!!

OK!!! What have the Yingluck/PTP party supporters got to say for themeselves now??? This government is proving to be the most disastrous in the history of Siam and that's after only a few months. We have potentially got 4 years of this nonsense.

Over to you now- lets hear some honest opinions about their abysmal performance from the protectors of this government - can I ask you one question? are you ready to admit that WE were right in predicting the outcome of having a bunch of incompetent individuals running the country. They have well surpassed my expectations in trashing the economy and creating a grim, indeed, future for the country. I bet that YOU are feeling pretty damned foolish now!!! Ha Ha Ha Ha!!

[SICHONSTEVE]

Of course the Oil Fund will have to borrow pretty soon to subsidize the LPG prices. Can't have LPG prices go up otherwise you'll have discontent among the taxi drivers and other base PTP supporters.

Us as well!!! as we have just converted our brand new Honda Freed to LPG (we did the same with our Jazz.), It saves us a fortune

[SICHONSTEVE]

The week of the election for present government, diesel pump price went up 75 stang in CM (30.74 vs 29.99). Since the new price 26.99, the CM pumps are at 27.74. CM price has been at regulated price, same as Bangkok for the past few years. I know there is some Thai logic in this price adjustment, just as there is for the total petrel price reduction. We just may have to wait for the explanation???

There isn't one - they seem to raise things according to what numbers appear in their mind!!!! What's it to be today Chai?? Oh, what about up 3.73 Baht for 1 of them and factor in some other number on something else, lets say down, er!!! whats the first 4 numbers that come into your mind Winnit?? 7, 1, 6, 4 - that's it!! Gasohoil down 7.164 baht today. We can play this game tomorrow - good fun innit!!!.

[SICHONSTEVE]

These fuel price cuts are only benefiting vehicle owners, as I don't see any of the savings being passed on to the consumer, in terms of transportation cost reductions or food price reductions! Or maybe it is too soon.

For heavens sake!!! give them a chance!! how do you expect them to get it right when they are plucking numbers out of the air!!!! Besides they probably hated maths at school - stupid numbers, who invented them and for what reason????

[phiphidon]

Of course the Oil Fund will have to borrow pretty soon to subsidize the LPG prices. Can't have LPG prices go up otherwise you'll have discontent among the taxi drivers and other base PTP supporters.

Us as well!!! as we have just converted our brand new Honda Freed to LPG (we did the same with our Jazz.), It saves us a fortune

Well one consequence of the need for the oil fund having to subsidise the taxi drivers and your use of LPG (jumping on the backs of the households and vendors the subsidy was supposed to be for) is that the Energy planners are considering raising the price from 18 baht per kg to a more realistic 30 baht per kg. Still I'm sure you can afford it.

[SICHONSTEVE]

Of course the Oil Fund will have to borrow pretty soon to subsidize the LPG prices. Can't have LPG prices go up otherwise you'll have discontent among the taxi drivers and other base PTP supporters.

Us as well!!! as we have just converted our brand new Honda Freed to LPG (we did the same with our Jazz.), It saves us a fortune

Well one consequence of the need for the oil fund having to subsidise the taxi drivers and your use of LPG (jumping on the backs of the households and vendors the subsidy was supposed to be for) is that the Energy planners are considering raising the price from 18 baht per kg to a more realistic 30 baht per kg. Still I'm sure you can afford it.

BET THEY DON'T!!!!! and yes I can!!!!

[slapout]

Well the CM pump prices must be set by people who add on a above sea level adjustment. Diesel went up by 1 baht here when the Bangkok price went up 75 stang. Wonder if the better business bureau/price control, people are getting discounts? Of course, this increase coincides with a drop in oil prices.

[lannarebirth]

Well the CM pump prices must be set by people who add on a above sea level adjustment. Diesel went up by 1 baht here when the Bangkok price went up 75 stang. Wonder if the better business bureau/price control, people are getting discounts? Of course, this increase coincides with a drop in oil prices.

Don't you remember that the PTT privatization went to only a few select buyers? Do you remember who they were?

[aussiebebe]

I clearly remember reading that the Government were going to float the price of industrial LPG over four quarters. Lowering the levies on benzine makes sense if the LPG subsidies were going to be removed. The concept of the Oil Fund borrowing money seems like a contradiction in terms.

[slapout]

Yes lannabirth, I remember the privatization but not the specific large block share purchases. Since I was not included in that select group, plus the sun has set several times since. Guess the powers that be feel they have the CM area public in their pocket, thus can gouge them for a few baht on a tank full.

[billd766]

Well the CM pump prices must be set by people who add on a above sea level adjustment. Diesel went up by 1 baht here when the Bangkok price went up 75 stang. Wonder if the better business bureau/price control, people are getting discounts? Of course, this increase coincides with a drop in oil prices.

I am sure that I read somewhere a few years ago that the price of fuel was higher upcountry due to the cost of transporting it 600 or 800 or 1,000 km.

[slapout]

Chiang Mai has had same price as Bangkok until the week of this past election. Going further north, yes the price was a little higher for transport. That was recently increased from 50 stang/liter to 75 stang/liter. Now it appears the transport fee again is going up and they included CM. CM city would certainly pump a lot of fuel in a days time and it would be a increase someone's back account quite nicely.