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ENERGY
WICHIT CHANTANUSORNSIRI
Energy and economics experts mostly agree that subsidising fuel prices is an unaffordable choice for the country. The disagreements start about when subsidies should be cut.
Piyasvasti Amranand, a former energy minister and now an adviser to Kasikornbank, argues that energy prices should be allowed to move freely with the market.
''We shouldn't really be asking when subsidies should be scrapped, since it's something that should have already been done by now,'' he said.
''The longer we delay, the greater the ultimate damage to the country.''
Dr Piyasvasti, speaking at an energy conference held yesterday by Krungthep Turakij newspaper, said subsidies ultimately distorted the market and reduced incentives for end-users to change their behaviour and conserve energy.
Subsidies for liquefied petroleum gas (LPG), for instance, had led to soaring demand by motorists to switch to LPG fuel systems.
LPG prices are fixed at 18 baht per kilogramme or the equivalent of 11.50 baht per litre, compared with petrol prices above 42 baht per litre. The government now fixes LPG prices at $320 per tonne, compared with a world price of $900.
If LPG prices were allowed to float with the market, prices would have to double to 36 baht per kilogramme.
Dr Piyasvasti said subsidy programmes targeted at fishermen, mass-transit operators and farmers also needed to be short-term only, in order to minimise the impact on the market.
''Scrapping these subsidies may result in short-term pain, but in the long run, will help lead to changes in consumer behaviour,'' he said.
''This in turn will help force us to find alternative energy sources, whether it be nuclear, wind or solar.''
Finance Minister Surapong Suebwonglee agreed that in principle, subsidies only distorted reality.
''But we are in a period of change, and it will take some time for this adjustment to be made,'' he said.
The government would scrap subsidies for LPG used in the transport sector in the next two months, although gas used by households would continue to be subsidised to help the public.
Dr Surapong expressed concern about a wage-price spiral, in which rising inflation led to calls for employers to raise salaries, which in turn leads companies to increase product prices, further fanning inflation.
Dr Piyasvasti said it was important that the public realised that high oil prices was not rooted in market speculation, but in the forces of supply and demand.
Bangchak Plc president Anusorn Sangnimnuan said retail pump prices could reach 58-59 baht per litre if crude oil prices rose to $200 per barrel.
''Personally though, I don't think we will see this happen anytime soon,'' he added.
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