Why won't Thailand lower it's gas prices when oil prices fall?

[spidermike007]

Many countries around the world raise and lower their prices at the pump when oil falls in price. Oil has fallen about 23% on the world market in the past year. In the US, and prices at the pump are down substantially. Here the prices were recently cut due to the government deciding that the excise tax that the PTT was keeping for itself was unfair to the public. They were absolutely right, and it was one of the wisest moves the new govt. has made so far. But, my question is, when prices of oil go up, gas here goes up? When it goes down, prices at the pump do not reflect that. Based on current prices, 95 should have dropped down to about 31 baht per liter. And the top grade (yellow) should have dropped down to about 36 baht per liter. Does anyone have info on how this works? Is the immense profit from this margin just kept by the state, or by PTT?

[AYJAYDEE]

exactly how large is this immense profit?

[richard_smith237]

I was of the understanding that Petrol / Gas at the stations was subsidised...

[spidermike007]

I was of the understanding that Petrol / Gas at the stations was subsidised...

I do believe that natural gas is subsidized. But, at about 169 baht per gallon (0ver $5 per gallon), for the yellow premium gas, I can assure you that is not a subsidized price. There is plenty of profit with that kind of pricing. I am fairly sure that money is going into either a government slush fund, or improving the bottom line of PTT.

[AYJAYDEE]

I was of the understanding that Petrol / Gas at the stations was subsidised...

I do believe that natural gas is subsidized. But, at about 169 baht per gallon (0ver $5 per gallon), for the yellow premium gas, I can assure you that is not a subsidized price. There is plenty of profit with that kind of pricing. I am fairly sure that money is going into either a government slush fund, or improving the bottom line of PTT.

so show us the profit margins. we want details.

[spidermike007]

Not sure how much light this sheds, since PTT has operations in 36 countries. But, it is a very profitable company, and I am certain at least a percent of that profit comes from retail gasoline sales in Thailand.

BANGKOK, April 10 (Reuters) - Thailand's top oil and gas company PTT Pcl said it aimed for 2014 net profit of 100 billion baht ($3.10 billion), up from last year's 94.6 billion baht, as its fifth gas separation plant will run at full capacity this year.

PTT's operations contribute 30 percent of profit, with the rest made up by subsidiaries, Chairman Pranpree Bahiddha-Nukura told reporters after a shareholder meeting.

Last year, its chemical unit, PTT Global Chemical Pcl , booked rising expenses over an oil leak in the eastern province of Rayong. That dragged down PTT's profit.

The profit forecast was in line with market expectation. State-controlled PTT is expected to report a net profit of 105 billion baht for 2014, according to Thomson Reuters I/B/E/S.

Chief Operation Officer Sarun Rungkasiri said he expected no growth in retail sales of oil products this year due to weak consumption, caused by prolonged political unrest and a slowing economy. This compared with growth of 2 percent to 3 percent in the previous years. ($1 = 32.2500 Thai baht) (Reporting by Pisit Changplayngam; Writing by Khettiya Jittapong)

Here is a little more info:

Thailand imports about 85 percent of its crude oil consumption, according to data from the energy ministry. It subsidizes prices of diesel, ethanol-blended gasoline and liquefied petroleum gas through a state oil fund that levies taxes on fuel users.

[AYJAYDEE]

Not sure how much light this sheds, since PTT has operations in 36 countries. But, it is a very profitable company, and I am certain at least a percent of that profit comes from retail gasoline sales in Thailand.

BANGKOK, April 10 (Reuters) - Thailand's top oil and gas company PTT Pcl said it aimed for 2014 net profit of 100 billion baht ($3.10 billion), up from last year's 94.6 billion baht, as its fifth gas separation plant will run at full capacity this year.

PTT's operations contribute 30 percent of profit, with the rest made up by subsidiaries, Chairman Pranpree Bahiddha-Nukura told reporters after a shareholder meeting.

Last year, its chemical unit, PTT Global Chemical Pcl , booked rising expenses over an oil leak in the eastern province of Rayong. That dragged down PTT's profit.

The profit forecast was in line with market expectation. State-controlled PTT is expected to report a net profit of 105 billion baht for 2014, according to Thomson Reuters I/B/E/S.

Chief Operation Officer Sarun Rungkasiri said he expected no growth in retail sales of oil products this year due to weak consumption, caused by prolonged political unrest and a slowing economy. This compared with growth of 2 percent to 3 percent in the previous years. ($1 = 32.2500 Thai baht) (Reporting by Pisit Changplayngam; Writing by Khettiya Jittapong)

Here is a little more info:

Thailand imports about 85 percent of its crude oil consumption, according to data from the energy ministry. It subsidizes prices of diesel, ethanol-blended gasoline and liquefied petroleum gas through a state oil fund that levies taxes on fuel users.

whats is their return on total investment?

[billd766]

Not sure how much light this sheds, since PTT has operations in 36 countries. But, it is a very profitable company, and I am certain at least a percent of that profit comes from retail gasoline sales in Thailand.

BANGKOK, April 10 (Reuters) - Thailand's top oil and gas company PTT Pcl said it aimed for 2014 net profit of 100 billion baht ($3.10 billion), up from last year's 94.6 billion baht, as its fifth gas separation plant will run at full capacity this year.

PTT's operations contribute 30 percent of profit, with the rest made up by subsidiaries, Chairman Pranpree Bahiddha-Nukura told reporters after a shareholder meeting.

Last year, its chemical unit, PTT Global Chemical Pcl , booked rising expenses over an oil leak in the eastern province of Rayong. That dragged down PTT's profit.

The profit forecast was in line with market expectation. State-controlled PTT is expected to report a net profit of 105 billion baht for 2014, according to Thomson Reuters I/B/E/S.

Chief Operation Officer Sarun Rungkasiri said he expected no growth in retail sales of oil products this year due to weak consumption, caused by prolonged political unrest and a slowing economy. This compared with growth of 2 percent to 3 percent in the previous years. ($1 = 32.2500 Thai baht) (Reporting by Pisit Changplayngam; Writing by Khettiya Jittapong)

Here is a little more info:

Thailand imports about 85 percent of its crude oil consumption, according to data from the energy ministry. It subsidizes prices of diesel, ethanol-blended gasoline and liquefied petroleum gas through a state oil fund that levies taxes on fuel users.

perhaps the money has gone back to top up the state oil fund which subsidses the tax on fuel. That would be a good idea ready for when the price of oil rises next time.

[AYJAYDEE]

Not sure how much light this sheds, since PTT has operations in 36 countries. But, it is a very profitable company, and I am certain at least a percent of that profit comes from retail gasoline sales in Thailand.

BANGKOK, April 10 (Reuters) - Thailand's top oil and gas company PTT Pcl said it aimed for 2014 net profit of 100 billion baht ($3.10 billion), up from last year's 94.6 billion baht, as its fifth gas separation plant will run at full capacity this year.

PTT's operations contribute 30 percent of profit, with the rest made up by subsidiaries, Chairman Pranpree Bahiddha-Nukura told reporters after a shareholder meeting.

Last year, its chemical unit, PTT Global Chemical Pcl , booked rising expenses over an oil leak in the eastern province of Rayong. That dragged down PTT's profit.

The profit forecast was in line with market expectation. State-controlled PTT is expected to report a net profit of 105 billion baht for 2014, according to Thomson Reuters I/B/E/S.

Chief Operation Officer Sarun Rungkasiri said he expected no growth in retail sales of oil products this year due to weak consumption, caused by prolonged political unrest and a slowing economy. This compared with growth of 2 percent to 3 percent in the previous years. ($1 = 32.2500 Thai baht) (Reporting by Pisit Changplayngam; Writing by Khettiya Jittapong)

Here is a little more info:

Thailand imports about 85 percent of its crude oil consumption, according to data from the energy ministry. It subsidizes prices of diesel, ethanol-blended gasoline and liquefied petroleum gas through a state oil fund that levies taxes on fuel users.

perhaps the money has gone back to top up the state oil fund which subsidses the tax on fuel. That would be a good idea ready for when the price of oil rises next time.

or to pay off the debt they took to top it up last time

[A1Str8]

Because it's the best country in Asia.

[spidermike007]

Not sure how much light this sheds, since PTT has operations in 36 countries. But, it is a very profitable company, and I am certain at least a percent of that profit comes from retail gasoline sales in Thailand.

BANGKOK, April 10 (Reuters) - Thailand's top oil and gas company PTT Pcl said it aimed for 2014 net profit of 100 billion baht ($3.10 billion), up from last year's 94.6 billion baht, as its fifth gas separation plant will run at full capacity this year.

PTT's operations contribute 30 percent of profit, with the rest made up by subsidiaries, Chairman Pranpree Bahiddha-Nukura told reporters after a shareholder meeting.

Last year, its chemical unit, PTT Global Chemical Pcl , booked rising expenses over an oil leak in the eastern province of Rayong. That dragged down PTT's profit.

The profit forecast was in line with market expectation. State-controlled PTT is expected to report a net profit of 105 billion baht for 2014, according to Thomson Reuters I/B/E/S.

Chief Operation Officer Sarun Rungkasiri said he expected no growth in retail sales of oil products this year due to weak consumption, caused by prolonged political unrest and a slowing economy. This compared with growth of 2 percent to 3 percent in the previous years. ($1 = 32.2500 Thai baht) (Reporting by Pisit Changplayngam; Writing by Khettiya Jittapong)

Here is a little more info:

Thailand imports about 85 percent of its crude oil consumption, according to data from the energy ministry. It subsidizes prices of diesel, ethanol-blended gasoline and liquefied petroleum gas through a state oil fund that levies taxes on fuel users.

perhaps the money has gone back to top up the state oil fund which subsidses the tax on fuel. That would be a good idea ready for when the price of oil rises next time.

The point being that when oil goes up in price, you can be assured that the prices at the pump will rise. When oil goes down, those savings are not being passed on to the consumer. There are no subsidies on non ethanol nor on non diesel fuel.

[AYJAYDEE]

Not sure how much light this sheds, since PTT has operations in 36 countries. But, it is a very profitable company, and I am certain at least a percent of that profit comes from retail gasoline sales in Thailand.

BANGKOK, April 10 (Reuters) - Thailand's top oil and gas company PTT Pcl said it aimed for 2014 net profit of 100 billion baht ($3.10 billion), up from last year's 94.6 billion baht, as its fifth gas separation plant will run at full capacity this year.

PTT's operations contribute 30 percent of profit, with the rest made up by subsidiaries, Chairman Pranpree Bahiddha-Nukura told reporters after a shareholder meeting.

Last year, its chemical unit, PTT Global Chemical Pcl , booked rising expenses over an oil leak in the eastern province of Rayong. That dragged down PTT's profit.

The profit forecast was in line with market expectation. State-controlled PTT is expected to report a net profit of 105 billion baht for 2014, according to Thomson Reuters I/B/E/S.

Chief Operation Officer Sarun Rungkasiri said he expected no growth in retail sales of oil products this year due to weak consumption, caused by prolonged political unrest and a slowing economy. This compared with growth of 2 percent to 3 percent in the previous years. ($1 = 32.2500 Thai baht) (Reporting by Pisit Changplayngam; Writing by Khettiya Jittapong)

Here is a little more info:

Thailand imports about 85 percent of its crude oil consumption, according to data from the energy ministry. It subsidizes prices of diesel, ethanol-blended gasoline and liquefied petroleum gas through a state oil fund that levies taxes on fuel users.

perhaps the money has gone back to top up the state oil fund which subsidses the tax on fuel. That would be a good idea ready for when the price of oil rises next time.

The point being that when oil goes up in price, you can be assured that the prices at the pump will rise. When oil goes down, those savings are not being passed on to the consumer. There are no subsidies on non ethanol nor on non diesel fuel.

the fact is the extra money may be used to pay down the debt that was taken to maintain the subsidy fund.

[Aussieroaming]

The fuel price at the pump is dependent on a few factors

1. Government excise tax

2. Labor cost

3. Lease cost for equipment, land etc

4. Subsidy schemes

5. Raw material cost

6. Fluctuating exchange rates

7. Refinery sale price and whether the fuel price contract is hedged.

Some of these price drivers are fixed, some are not, but it's logical that a 23% drop in oil doesn't mean a 23% drop in fuel at the bowser.

[arthurwait]

This thread has been done a hundred times before , the people who post it live in 'la la I'm not listening' land, the prices do fall .

On several I have posted the records of price rise and fall.

Some fuels are subsidized. Diesel should be higher.

[circusman]

91 recently dropped 50 satang.

[Suradit69]

I was of the understanding that Petrol / Gas at the stations was subsidised...

I do believe that natural gas is subsidized. But, at about 169 baht per gallon (0ver $5 per gallon), for the yellow premium gas, I can assure you that is not a subsidized price. There is plenty of profit with that kind of pricing. I am fairly sure that money is going into either a government slush fund, or improving the bottom line of PTT.

At $5 a gallon it's cheaper than most places. The prices in the chart below have been restated in US $ and the US gallon ... spot many selling for $5 or less aside from the US??

Edited October 15, 2014 by Suradit69

[monkeycountry]

I was of the understanding that Petrol / Gas at the stations was subsidised...

I do believe that natural gas is subsidized. But, at about 169 baht per gallon (0ver $5 per gallon), for the yellow premium gas, I can assure you that is not a subsidized price. There is plenty of profit with that kind of pricing. I am fairly sure that money is going into either a government slush fund, or improving the bottom line of PTT.

so show us the profit margins. we want details.

Profit margin of PTT is appx. 3% according to the SET (a very low profit margin)

Spidermike007. PTT has a turnover of around 3 trillion baht (3,000.000,000,000 baht) and a profit of around 100 billion, as you mentioned in a post above. While 100 billion is alot of money, it is a very low profit compared to a 3 trillion turnover. Assume for a second that the entire turnover was from gasoline sales, then PTT could decrease the gasoling price by 3%, any more than that and the company would be losing money - and eventually go bankrupt.

Further, keep in mind that over 50% of PTT belongs to the finance ministry (the tax payers), so only appx. 50 billion (or 1.5% of the turnover) is going to private shareholders - is that too much you think?

Do you know any other company that has a profit margin as low as 3%? (and has not gone bankrupt yet).

Last but not least, as someone else said, this has been debated many times on TV. All the answers are in other threads.

Edited October 15, 2014 by monkeycountry

[Wat dee]

Why they be any different, rest of the world don't really react when price drops. Price increase is different story...

[monkeycountry]

Not sure how much light this sheds, since PTT has operations in 36 countries. But, it is a very profitable company, and I am certain at least a percent of that profit comes from retail gasoline sales in Thailand.

BANGKOK, April 10 (Reuters) - Thailand's top oil and gas company PTT Pcl said it aimed for 2014 net profit of 100 billion baht ($3.10 billion), up from last year's 94.6 billion baht, as its fifth gas separation plant will run at full capacity this year.

PTT's operations contribute 30 percent of profit, with the rest made up by subsidiaries, Chairman Pranpree Bahiddha-Nukura told reporters after a shareholder meeting.

Last year, its chemical unit, PTT Global Chemical Pcl , booked rising expenses over an oil leak in the eastern province of Rayong. That dragged down PTT's profit.

The profit forecast was in line with market expectation. State-controlled PTT is expected to report a net profit of 105 billion baht for 2014, according to Thomson Reuters I/B/E/S.

Chief Operation Officer Sarun Rungkasiri said he expected no growth in retail sales of oil products this year due to weak consumption, caused by prolonged political unrest and a slowing economy. This compared with growth of 2 percent to 3 percent in the previous years. ($1 = 32.2500 Thai baht) (Reporting by Pisit Changplayngam; Writing by Khettiya Jittapong)

Here is a little more info:

Thailand imports about 85 percent of its crude oil consumption, according to data from the energy ministry. It subsidizes prices of diesel, ethanol-blended gasoline and liquefied petroleum gas through a state oil fund that levies taxes on fuel users.

perhaps the money has gone back to top up the state oil fund which subsidses the tax on fuel. That would be a good idea ready for when the price of oil rises next time.

The point being that when oil goes up in price, you can be assured that the prices at the pump will rise. When oil goes down, those savings are not being passed on to the consumer. There are no subsidies on non ethanol nor on non diesel fuel.

Please look up how the oil fund works, that will answer your questions. It is a bit complicated though, but no company nor the government is running away with lots of profit. The money is basically just moved around to subsidise various gas types at the expense of others and to cover the oil fund losses when oil prices are high. I believe the oil fund is currently a few billion in minus.

Also, before having a go at PTT. PTT is in fact subsidising natural gas to the tune of 20 billion baht / year and rising, which benefits pretty much everyone, except of course PTT shareholders. That is why natural gas is so cheap in Thailand.

Edited October 15, 2014 by monkeycountry

[easyas]

Try buying petrol / diesel in Australia or better still in the UK !!

Stop grumbling !!!

[AnotherOneAmerican]

Pump prices have been about the same in Thailand for 5 years.

The most popular petrol flavor is always around 34bht/l.

And diesel at 30bht/l.

Edited October 15, 2014 by AnotherOneAmerican

[HUAHIN62]

There is also a lag between lower international prices and lower local prices, due to fuel in the supply line thats priced at old/higher prices.

[chiang mai]

There's much to be said for having stable prices at the pump, the fixed pricing over time achieves that.

[NanLaew]

I only recall the US had dynamic gas prices at the pump. It pretty much stays within a tight (more expensive) range in other countries apart from the mid east where water costs a lot more.

[gemguy]

Normally the prices would fall eventually when old inventory is completely sold out and they are refining and distributing the more recent oil feed stock that they are purchasing, refining and storing until the retailers previous inventory is completely sold old.

That and the retail outlets will milk the profits for as long as they can while the price at the pump slowly starts to fall as each retailer has newly refined product available to them that reflects the price of current oil refinery feed stock.

Here in Thailand there may very well be a degree of collusion amongst the retail operations and possibly the government to maintain the cash flow and continue selling at the higher prices and ignore the fact that the international price of crude oil feedstock purchased by refiners may have dropped significantly.

However.......Most of the international oil that the Thai refiners do purchase is purchased through the Singapore commodities exchange, so Singapore crude inventory prices would reflect oil purchased and stored as much as 2 months ago while that oil comes from Indonesia and Brunei and other regional oil producing countries that do not necessarily follow the drop in price seen on the other major international commodity exchanges.

Plus the price of oil you see is for light, sweet crude, which is always in high demand, while the refinery operations in this region need a continuous supply of light, sweet crude feedstock as that is what their refinery operations were originally designed for ...although they can also process medium sweet crude blended with their light sweet crude....but they do not recover as much of the higher value products that are more profitable.

If the prices for the light sweet crude feed stock are maintained by the producing countries, in this region, then the refiners have no choice but to pay the higher prices as their crude oil feed stock is delivered by tanker based on 30 day delivery contract periods from the time of purchase.

If they refuse to pay the prices then their refinery operations can not be simply turned off and turned back on relevant to processing say 100, 000 barrels a day or maybe as much as up to 300,000 barrels a day for some of the more recent refinery expansions in the last decade.

Their alternative crude oil sources are in the middle east and that would involve a new set of oil delivery logistics having to be orchestrated resulting in the timely delivery of their crude oil by way of tankers originating from the middle east region.

Also many of those tankers that would /could carry the oil are booked for several months at a time making it difficult to secure the transportation of the crude oil to Thailand.

Then they would be competing with many other countries continually securing tanker shipments originating from the middle east or say west Africa and traveling to the USA and Europe...for example.

The refiners in Thailand are more or less stuck with having to purchase their crude oil feed stock from the regional crude oil producing countries such as Brunei and Indonesia and Malaysia.

If the producing countries in this region are not dropping their prices significantly then the refiners are not getting the crude oil feed stock cheaper and then that means the prices at the pump are not going to drop relative to the crude oil prices seen on other international commodities exchanges.

Right now the USA is stated as been "awash in crude oil" and natural gas and is also now stated as being a net refined product supplier ...so you will see the price dropping there....but Asian oil producers do not have to follow what is happening in the USA and other consuming market places.

Plus the demand for the refined products is stable in this region with all the economic expansion occurring in this part of the world the regional crude oil suppliers are not going to lower their prices.

That and the fact that they are not obligated by any laws to lower the prices of their products just because the cost of the crude oil is dropping in other regions of the world.

Plus, In nearly every industry it takes a length of time before a drop in raw material prices are seen reflected in a drop in retail prices to the consumers.

Cheers

Edited October 15, 2014 by gemguy

[Robert24]

My understanding is that they have an oil fund with which they subsidise diesel/ gas when oil prices are high. Apparently they used quite a lot money out of this fund and talk about increasing LPG and diesel prices. However it seems to me extremely intransparent how this oil fund is managed. I haven't found someone who cna really explain it to me. Personally I think Thailand wiuld be better off to just scrap this oil fund and let pricea fluctuate and reflect Global prices.

[glcdc]

I think they do it just so you will have something to complain about. You should be thankful you now get to waste your energy on bitching about world governments..

[GOLDBUGGY]

Well there are 3 main factors to consider and perhaps even more.

1) A lot of Oil is bought on the Futures Market, especially from Importing Countries like Thailand, at a set price. So it takes a long time for this Oil to work its way through the system, which is the Gas Pump.

The Beauty of this is that when Oil Prices drop, like they are now, Importers have justification to keep their prices high, and until this Oil is worked through the system. When Oil Prices go up, they also have justification for increases prices which is what they do right away. One reason why Oil Companies are so rich.

2) When Oil is Government Subsidized or Taxed, which it may be for Thailand, and the Price goes down, the the price at the Pump will stay the same. Only the Subsidy or Tax will go up or down.

3) Crooks and Thieves, who use the first two excuses to gouge you at the pumps!

[spidermike007]

I think they do it just so you will have something to complain about. You should be thankful you now get to waste your energy on bitching about world governments..

Thank you for clearing that up in such an articulate and thoughtful manner. Coming soon after the incredibly intelligent, informative and concise explanation by gemguy, you have given us our daily example of extreme contrasts by TV posters.

Edited October 16, 2014 by spidermike007

[uffe123]

<script type='text/javascript'>window.mod_pagespeed_start = Number(new Date());</script>

Because it's the best country in Asia.

You must be joking, PTT and the government are raping the poor people. And now they want to raise the sales tax to 10%.