Energy Pricing Policy In Urgent Need Of Cohesion: Thai Opinion

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EDITORIAL

Energy pricing policy in urgent need of cohesion

The Nation

BANGKOK: -- Varying subsidy levels, uncertainty on fuel supply, and possible logistics inefficiency are all contributing to the problem of the rising cost of living

Amidst the public outcry over the recent sharp increase in retail prices and the cost of living, the Internal Trade Department has said that rising fuel prices have only a small impact on the production cost of goods. The department is adamant the prices of consumer goods have not risen as high as people have said.

The argument made by the department is in complete contrast to the general sentiment among members of the public. The department, which is under the Commerce Ministry, says that an increase in the oil price would affect the production costs of consumer products such as soap and shampoo by only 0.05 per cent, and for canned tuna by only 0.4 per cent. This is despite the fact that rising fuel prices would affect the cost of construction materials such as steel by 5 per cent, it said.

Nevertheless, consumers have been feeling the pain of the sharp price rises since early this year, especially as the political crisis in the Middle East intensifies. The prices of goods on the market have, overall, obviously risen by more than 5 per cent. This begs the question of whether there is something wrong in the system that the government has not looked into.

First of all, if the rise in oil prices is not having such a great impact on the production cost of goods, then there must be opportunist traders who are benefitting from riding on public sentiment.

The Internal Trade Department has added that while 80 per cent of production costs come from raw materials, 10 per cent are from production expenses and only up to 5 per cent from fuel costs.

Of course, the rising fuel price has a multiple effect on other production costs. But such price rises should be manageable, taking into consideration the actual impact from the fuel price rise on the merchandise price.

The figures claimed by the Internal Trade Department might expose a flaw in Thailand's logistics system. A product item often goes through a supply chain in which there is a transport cost burden at every single step of the way. The actual rise in production cost may be below 5 per cent, but ineffective and inefficient transport systems can result in additional costs.

Apart from potential problems in the logistics system, the ongoing uncertainty over global fuel prices should serve as an opportunity for the government to revise the fuel price structure. The uneven structure of current fuel subsidies can only exacerbate the negative effects because it distorts the market system. For instance, the fuel subsidy has burdened the Oil Fund with losses to the tune of Bt140 billion, and at the same time has not had an effective impact on curbing rising prices on the market.

It is the state's duty to help cushion the public from the effects of fluctuating and rising prices; therefore the government should urgently look at the fuel price structure in the whole system and make sure that the public is able to cope with price rises. At the same time, it should also begin a more effective public campaign for efficient energy consumption.

The government must not pick and choose subsidies for certain types of fuel because the uneven price levels of different types of fuel will only create a false market. For example, the excise waiver on diesel will not only affect the government's revenue stream, but will also encourage many consumers to simply shift to diesel because of its lower price.

The ongoing political strife in the Middle East and the gloomy economic prospects for Europe will only increase uncertainty when it comes to predicting global fuel price movements. The public will have to learn to live with this uncertainty, which will adversely affect net oil-importing countries such as Thailand.

However, to mitigate as many of the negative effects as possible,the government must create a more realistic price and logistics structure to ensure the most efficient use of energy.

-- The Nation 2012-03-20

[JohnyBangkok]

That sound great, but once again without Tea money- it will not come to pass to. This new Government does not care about the very people that elected it. How many millionaires are now in the Government there? I now I sound like a broken record, But until the people of Thailand become more educated things will never change- here is a test next time you come a cross a local Thai person ask them where Brazil is at or the United States- They are not taught thing that don't deal with the country- they are kept that way for a reason.