Lower fuel costs have little effect on Thai consumer goods

[webfact]

GOODS PRICE
Lower fuel costs have little effect on consumer goods
Petchanet Pratruangkrai
The Nation

BANGKOK: -- The plunge in the cost of diesel fuel has had little downward impact on the retail prices of most goods, according to the Commerce Ministry's Internal Trade Department.

Boonyarit Kalayanamit, director-general of the department, said the prices of most consumer goods had not decreased in accordance with the reduction in domestic fuel prices, since most companies had switched to natural gas for vehicles (NGV) and only about 30 per cent of goods transport still relied on diesel.

The department found that for large products, the lower diesel price caused their retail prices to fall by only 0.7-0.8 per item, meaning that for a Bt100 product, the price might drop by just 70-80 satang. For small items, the lower cost of diesel might result in prices to fall by only 0.01 per cent.

Boonyarit said the department needed to study the cost structure of each product carefully, as fuel is not the only expense for manufacturers. Other costs such as warehousing, operating expenses, wages and raw materials had to be taken into account.

The department will ensure that manufacturers and consumers receive equal benefits, he said, but if it were found that lower fuel prices had cut a manufacturer's costs significantly, it would be expected to reduce its retail prices accordingly.

However, the department may need to give manufacturers some time to do this as they are bound by transport contracts, normally for three to six months.

Manufacturers who do not reduce retail prices in accordance with real costs could face legal action under the Goods and Service Prices Act, and could face a Bt140,000 fine and/or seven years in jail.

Source: http://www.nationmultimedia.com/business/Lower-fuel-costs-have-little-effect-on-consumer-go-30251519.html


-- The Nation 2015-01-09

[Thai at Heart]

Which proves once and for all, that the governments infernal meddling with the price mechanism and protectionism serves basically to screw Somchai.

[NongKhaiKid]

A day or so ago wasn't there an article saying Thais were reveling in lower fuel costs as it gave them more money in their pockets to ' splurge on big ticket items ' ?

[Mango Bob]

So when oil prices start to climb again prices will not raise.

[ezzra]

Nothing new here, this is classic market's mechanism whereby prices are quick to go

up but very slow, if at all, to come down, not only here in Thailand, it's synonym all

over the world...

[talktomarty]

But doesn't the lower price of diesel come from our dear El Generalissimo as a Christmas gift and has nothing to do with the plunging price of oil on the global market??

[shaurene]

Happens all the time in Thailand and many other country's, when commoditys go up makers up the price, when they go down they do not reduce. China is one main player here. In New Zealand we import Dehumidifiers and portable air conditioners and supply our retail customers.

The manufacturers in China do it all the time. We pay them in $US and they base their price on the exchange rate to their China currency, few yrs back their currency was rising against the $us they stated if their currency goes up 5% the product price increases and Copper is one of the main parts with our products and when copper prices were rising all the time they increased their product. But over the last 9 months or so commoditys like copper have dropped by huge reductions and the $US has increased and the get more of their own currency in the exchange rate but they never reduce their product price, but when the $US starts to weaken again and commoditys start to increase which they will they will start to increase their products again.

[Tatsujin]

30 per cent of goods transport relies on diesel? Oh really? I'll remember that next time I'm stuck on my bike behind one of those "natural gas" goods transport vehicles that's belching out diesel fumes. Or perhaps I'm just unlucky enough to only ever find the 30% that are still using diesel.

[paddyjenkins]

Lower input costs don't translate into lower prices for consumers because of cartels, an absence of competition and an absence of effective government regulation, itself a function of incompetence, corruption and an attitude of the elite of not giving a damn. But when those input prices bounce back you can bet your bottom dollar that the rise will be passed on and probably with magnification.

Edited January 9, 2015 by paddyjenkins

[slapout]

the commerce ministry personel makeup, no matter who is in charge of government, must be comprised of graduates of a special school who either were staffed by complete retards, or the special school only works with a 4 year school program, starting when the students are kicked out of the local temple schools, as they could not keep up with the pre school students in handlinging complex assignments, nap time, use utensiles to eat, use bum gun, ete

[emilymat]

Which proves once and for all, that the governments infernal meddling with the price mechanism and protectionism serves basically to screw Somchai.

I agree. 'Command' economies are bound to fail eventually.

[rickirs]

In a free enterprise system Market Demand NORMALLY rules the market price. Just because an element of the cost to produce and/or deliver the product to the retail market decreases for whatever reason, profit motive will dictate no change in the price. If the public is comfortable with paying for example 300 baht for an item, why would a manufacturer, distributor, or retailer take less profit if any of the associated costs decrease, ie., lower fuel prices?

However, Thailand has a law called the Price and Services Act of 1992. The law is enforced by a governmental agency called the Central Commission on Prices of Goods and Services (CCP). At first glance the law seems designed to prevent monopolistic pricing practices such as price fixing and opportunistic pricing such as artificial shortages created by natural disasters. However, the law provides the CCP with the power to -

"determine the maximum rate of profit per unit of controlled goods or services or determine the proportional difference between the purchase price and sale price of controlled goods or services in each trading period."

The CCP has summons and arrest authority with its enforcement role. So the government can force privately-owned businesses to change profits on their goods and services without regard to market conditions. This law as a whole is an obstacle to free enterprise and may encourage considerable opportunities for corruption. This law would also seem potentially damaging to the 2015 ASEAN Community economy wherein the Thailand government can manipulate ASEAN pricing to favor "made in Thailand" products and services. This law needs to be amended to encourage free enterprise.

Edited January 9, 2015 by rickirs

[Tomtomtom69]

But doesn't the lower price of diesel come from our dear El Generalissimo as a Christmas gift and has nothing to do with the plunging price of oil on the global market??

I think what's more significant is the massive fall in prices of unleaded fuel, including gasohol. The price of diesel hasn't really fallen that much. In Bangkok the average price is now 26.39 Baht/L compared to 29.99 Baht/L before all these recent fuel price dips. However, gasohol 91 was more than 36 Baht per L and is now just 27.18, only marginally higher than diesel. The way things are going gasoline/petrol and gasohol 91/95 may be cheaper than diesel again soon, just like in 2008.

[chooka]

But doesn't the lower price of diesel come from our dear El Generalissimo as a Christmas gift and has nothing to do with the plunging price of oil on the global market??

Yes he personally lowered the world oil prices as a new years gift to thai people

[torpedo1970]

But doesn't the lower price of diesel come from our dear El Generalissimo as a Christmas gift and has nothing to do with the plunging price of oil on the global market??

Yes he personally lowered the world oil prices as a new years gift to thai people

This is a classic one.

Even in the western world we never see the consumer goods prices go down on changes of fuel prices (down that is) but if the fuel prices goes up, then everything goes up.....

this should however help the struggling bus companies with competing with Air Asia.... But.... did the ticket price go down?

Lower the prices?? never, it is high season!

TIT

[jabis]

Surprise. Works exactly the same in any western nation, or rather in any commodity regardless of nation. Once you have a price point with which consumers like - you will not deviate from it. Only if the price point is too hurtful, or enough of competition for such commodity, will the price point go down a notch.

[Chao Lao Beach]

Happens all the time in Thailand and many other country's, when commoditys go up makers up the price, when they go down they do not reduce. China is one main player here. In New Zealand we import Dehumidifiers and portable air conditioners and supply our retail customers.

The manufacturers in China do it all the time. We pay them in $US and they base their price on the exchange rate to their China currency, few yrs back their currency was rising against the $us they stated if their currency goes up 5% the product price increases and Copper is one of the main parts with our products and when copper prices were rising all the time they increased their product. But over the last 9 months or so commoditys like copper have dropped by huge reductions and the $US has increased and the get more of their own currency in the exchange rate but they never reduce their product price, but when the $US starts to weaken again and commoditys start to increase which they will they will start to increase their products again.

so dont buy from the ching chongs