Diesel price likely to pass 30 baht a litre
Bangkok Post: 5 Feb 2011
Diesel likely to pass 30 baht
Government review of other subsidies urgedThe government is highly likely to fail in its attempt to keep diesel prices below 30 baht a litre as promised, as the world's oil prices continue rising.
"Global oil prices have increased too much," said Energy Minister Wannarat Channukul. "The 5 billion baht allocated from the Oil Fund to subsidise petrol is likely insufficient."
The allocation is expected to run out in nine days after the Energy Policy Committee agreed yesterday to subsidise another 40 satang a litre for B3 and B5 diesel.
The government has already spent 3.436 billion baht of the 5-billion budget, leaving 1.564 billion or enough to cover nine days.
"Next week when the fund runs dry we will discuss the programme with the Finance Ministry," said Mr Wannarat.
He said the discussion would include whether to let diesel prices move above 30 baht a litre or increase the subsidy budget through an excise tax increase or another allocation from the state Oil Fund.
The Oil Fund has cash on hand of 23.38 billion baht, a significant drop from 27.5 billion before the subsidy programme started on Dec 17.
The Shell Company in Thailand expects global crude oil will stay above $90 per barrel over next two months.
Chairwoman Pissawan Achanapornkul said crude in the global market rose above $80 once the cold season started late last year and had surpassed $100 due to political conflicts in many North African countries.
"I don't see any signs or hints that the price will drop," she said. "We encountered $140 per barrel in the past, and hitting that level again is not beyond expectations."
She urged the government to review the existing subsidy programme that now covers several petroleum products such as compressed natural gas, liquefied petroleum gas and diesel.
"Subsidies should be given to just one product, not all of them," she said. "A subsidy should also be short-term, because otherwise people will ignore saving energy, and exploration will eventually become difficult while prices rise. The subsidy comes from taxpayers' money. It should instead be spent on energy-saving mass transit or rail development."
Shell, the first oil trader to sell only B5 biodiesel, is running down its B5 stocks and shifting to sell B3 biodiesel at its pumps nationwide due to the product's better gross margins and uncertainty about government policy for alternative fuel development.
The move is also aimed at stabilising palm oil prices, which have soared because of shortages and left food producers facing high costs.
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