Cut in fuel prices welcomed, tipped to boost spending and economic growth

[Lite Beer]

Cut in fuel prices welcomed, tipped to boost spending and economic growth
Business reporters
The Nation

BANGKOK: -- The decision by the National Council for Peace and Order (NCPO) on Thursday to reduce fuel prices has been welcomed amid feedback that it will spur consumer spending and economic growth.

And while the price of goods will not be affected by a 14-satang increase in the retail price of diesel, some have expressed concern that a rise in the retail price of gas could push up inflation.

Petrol and gasohol (petrol mixed with ethanol) was down by a range of Bt1 to Bt4 per litre.

The new fuel prices, effective from yesterday have cut Bt3.89 a litre off the price of octane 95 fuel to Bt44.86, while gasohol 95 was down from Bt39.93 a litre to Bt37.8.

Gasohol E20 (mixed with ethanol 20 per cent) is now Bt33.98 a litre, down Bt1.

Meanwhile, the diesel price was by 14 satang from Bt29.85 a litre to Bt29.99.

Kesara Manchusree, president of the Stock Exchange, said the fuel price cuts would help boost the economy as every sector would see a drop in energy costs and this would ultimately boost the country's competitiveness.

The slight rise in the diesel price would not affect inflation, the Bank of Thailand and Commerce Ministry said.

"The lowering of energy costs will slightly lower the central bank average estimation for headline inflation [including food and energy prices] this year but will not affect core inflation," Roong Mallikamas, senior director of Macroeconomic at the Bank of Thailand, said.

She said the effect of lower energy costs on core inflation would be "insignificant" because the energy cost was lowered not increased and that the effect would not also spur lower costs of general goods as business operators were reluctant to lower the prices of products. This was because they believe that raising prices is more difficult if they have been lowered.

Jintana Chaiyawonnagal, head of the Internal Trade Department, said the rise in the diesel price would have a very small impact on prices of goods as most industry shipment relies on NGV and LPG gas for transportation.

"However, if the gas price is raised in the following quarterly period, it could cause higher goods prices in the future," she said.

Jintana said the diesel price was back at the same price after decreasing for three months and producers of consumer goods had already agreed to freeze retail prices until November.

She said lowering the price of petrol and gasohol would lower living costs and increase spending power, so inflation should stay under the target of 2-2.8 per cent, from an average of 2.23 per cent in the first seven months of the year.

Energy permanent secretary Areepong Bhoocha-oom said the oil price adjustments came as part of a policy to "neutralise" excise tax rates levied on each finished oil product, to help reflect the true cost of fuel.

More than 20 million motorcyclists were among the fuel users who would enjoy a price cut, he said, while the price of diesel was still no more than Bt30 a litre, and the Oil Fund continued to earn a monthly inflow of Bt2.5 billion.

Meanwhile, Prime Minister Gen Prayuth Chan-ocha has assigned the Energy Ministry's Department of Mineral Fuels and oil refiners to discuss a possible halt in petroleum exports, in light of heated debates on the energy situation in Thailand. The country currently exports about 12,000 barrels of crude oil a day.

Source: http://www.nationmultimedia.com/business/Cut-in-fuel-prices-welcomed-tipped-to-boost-spendi-30242115.html

-- The Nation 2014-08-30

[Ombra]

Will this really boost spending and help the economy? People like me who buy 30 litres a week of E20 will be 30 baht better off. Those who buy 95 will save 120 baht.

[worgeordie]

Would be better if they paid off debts,or even saved the money,

but no it will be spent,plus more debit.one thing for sure the price

of everything else will not come down because of this,but if it goes

up 1 bht the price of everything rises.

regards Worgeordie

[emilymat]

Will this really boost spending and help the economy? People like me who buy 30 litres a week of E20 will be 30 baht better off. Those who buy 95 will save 120 baht.

Just what I was thinking. Let's all go down Big C now and buy a new TV.

[marcusd]

Thailand exports oil but imports 95% of fuel needs? Crazy

[billd766]

However the price of diesel is to rise by 14 satang per litre.

I know it isn't very much until you consider that 80% or more of goods in Thailand are moved by road mostly in diesel vehicles so if the transporters raise their prices due to the extra cost it will have a knock on effect.

[Triplebank999]

Will this really boost spending and help the economy? People like me who buy 30 litres a week of E20 will be 30 baht better off. Those who buy 95 will save 120 baht.

They're probably not counting on people like you to boost the economy.

Having said that, you are aware that there are millions of others whose collective spending may help the economy?

Edited August 30, 2014 by Triplebank999

[Triplebank999]

Thailand exports oil but imports 95% of fuel needs? Crazy

The crude oil that Thailand exports does not meet the standards required by Thai refineries, so that is exported and better quality crude is imported for refining. Not crazy at all.

[dawnb]

I hope the prices will fall lower

[Giddyup99]

Gasohol E20 (mixed with ethanol 20 per cent) is now Bt33.98 a litre, down Bt1.

Be still my heart! What will I do with that extra 20 baht?

[Brian Corrigan]

Thai's are so good at talking up their economy. This will not change consumer debt at 85% of GDP.

[cloudhopper]

Will this really boost spending and help the economy? People like me who buy 30 litres a week of E20 will be 30 baht better off. Those who buy 95 will save 120 baht.

They're probably not counting on people like you to boost the economy.

Having said that, you are aware that there are millions of others whose collective spending may help the economy?

Populism never works because increased spending (consuming) never helps an economy improve. Only producing a surplus and investing it in further production helps improve an economy, with the natural result of lower prices over time.

[dominique355]

Even better would be to let the market set the price without the government playing apprentice sorcerer. Government intervention only distorts the real price of energy and prevents effective saving of energy and thereby protecting the environment. Other measures are also necessary like abolish protectionism in import taxes, favoring outdated and overpriced domestic products.

[Benmart]

Will this really boost spending and help the economy? People like me who buy 30 litres a week of E20 will be 30 baht better off. Those who buy 95 will save 120 baht.

They're probably not counting on people like you to boost the economy.

Having said that, you are aware that there are millions of others whose collective spending may help the economy?

Agreed.

Often times, people with the least stake in an issue have a myopic view of the bigger picture.

I do not understand the bigger picture myself, but prefer to wait and see where this is heading.

[Benmart]

Gasohol E20 (mixed with ethanol 20 per cent) is now Bt33.98 a litre, down Bt1.

Be still my heart! What will I do with that extra 20 baht?

"A Baht saved, is a Baht earned".

Thanks, Ben F.

[wilcopops]

as most of the economy runs on diesel (which admittedly is already subsidised) I can't see it being much of a boost for. there economy.

[wilcopops]

Will this really boost spending and help the economy? People like me who buy 30 litres a week of E20 will be 30 baht better off. Those who buy 95 will save 120 baht.

Just what I was thinking. Let's all go down Big C now and buy a new TV.

and get it delivered in a diesel-powered truck?

[JesseFrank]

However the price of diesel is to rise by 14 satang per litre.

I know it isn't very much until you consider that 80% or more of goods in Thailand are moved by road mostly in diesel vehicles so if the transporters raise their prices due to the extra cost it will have a knock on effect.

I think you will find that the majority of those diesel trucks drive on CNG/NGV.

Edited August 30, 2014 by JesseFrank

[bangon04]

as most of the economy runs on diesel (which admittedly is already subsidised) I can't see it being much of a boost for. there economy.

Did they mention LPG or NGV? A lot of road transport is using it.

[tonbridgebrit]

as most of the economy runs on diesel (which admittedly is already subsidised) I can't see it being much of a boost for. there economy.

Well, they should subsidise diesel even more.

[tonbridgebrit]

Yes, the cut in fuel prices will boost spending and spur economic growth.

Basically, tax on fuel is a regressive tax, it hits the low-income people more than it hits rich people. So, yes, a good idea to remove this tax and increase subsidies for fuel.
They should cut fuel prices even more, that way, we see even more economic growth.

[Cake Monster]

14 Setang / Litre on Diesel, will surely ramp up the inflation rate in the country.

Thais need very little excuse to put up the end consumer price paid by at least 10% on even the smallest amount of movement in procured costs.

The use of a 1 Baht increase in end product is not, and has not, been entertained for a few years now, so the end product will rise by 5 Baht / 10 Baht.

This will be felt more in the costs of staples, like eggs and veggies Etc.

[billd766]

However the price of diesel is to rise by 14 satang per litre.

I know it isn't very much until you consider that 80% or more of goods in Thailand are moved by road mostly in diesel vehicles so if the transporters raise their prices due to the extra cost it will have a knock on effect.

I think you will find that the majority of those diesel trucks drive on CNG/NGV.

Not always true since most of the pickups are diesel powered. A lot of the long distance trucks are but when the the load gets to a central depot it gets taken out in the smaller trucks from 10 ton Hinos etc down to pickup sized.