The diesel price has been cut by 14 satang a litre to 29.85 baht effective today after the Energy Policy Management Committee (EPMC) chaired by deputy junta chief ACM Prajin Jantong ruled the marketing margin for the fuel was too high.
PTT is the first oil retailer to cut its retail price of diesel by 14 satang a litre. Somchai Poomlard
ACM Prajin, head of economic affairs for the National Council for Peace and Order (NCPO), said after yesterday's first meeting of the EPMC that oil retailers had agreed to cut the marketing margin by 71 satang a litre, to 1.50 baht from 2.21 baht.
Of the total, 57 satang will be allocated to the state-owned Oil Fund, with 14 satang left for cutting the retail price of diesel.
Used in subsidising fuel prices, the fund is now heavily in debt to the tune of 7.5 billion baht. After the increased allocation, it is likely to gain another 30 million baht per day.
Since 2011, the diesel price has been kept below 30 baht a litre. Before the latest adjustment, it was quoted at 29.99 baht.
"Cutting the diesel price is one of the junta’s steps to address the high cost of living for Thais," said ACM Prajin.
"Energy prices for all sectors including cooking gas, fuel, electricity and tariff rates and allocations to various funds will be finalised by the end of this month."
Oil and gas giant PTT Plc yesterday became the first oil company to announce it would cut its marketing margin and retail price for diesel. After the reduction, the margin will be 1.50 baht for Greater Bangkok and 1.30 baht elsewhere.
"The oil margin is lower than it should be, but PTT can offset that by our margin from non-oil businesses such as minimarts, coffee shops and car care," said senior executive vice-president Auttapol Rerkpiboon.
In a related development, energy analyst Manoon Siriwan opposed the idea of dissolving the Oil Fund, saying the price of biofuels would increase.
"Abolishing the Oil Fund would lower the price of petrol 95 by 10 baht, with gasohol increasing since the fund would not be subsidising it anymore," he told an energy seminar held at the Stock Exchange of Thailand yesterday.
If the price of petrol and gasohol are only slightly different, there would not be much incentive for consumers to use biofuels, he said.
"This contradicts the national renewable energy policy of encouraging consumers to use alternative fuels," said Mr Manoon.
The fund is still needed to subsidise the price of liquefied petroleum gas (LPG) at some 30-40 billion baht a year.
If cancelled, the price of LPG would rise by four or five baht a kilogramme to 26 baht.
Thawarat Sutabutr, deputy director-general of the Alternative Energy Development and Efficiency Department, said without the Oil Fund, demand for renewable energies would decrease and ethanol factories would be forced to shut down.
At the same seminar, Tevin Vongvanich, president and chief executive of PTT Exploration and Production (PTTEP), said Thailand's energy policy must be based on market forces.
"Even though energy can always be imported, the price is likely to increase if the subsidy continues. And no one is selling to Thailand at the subsidised price," he said.
Energy Ministry statistics show Thailand imports 85% of its crude oil, 70% of its coal and 20% of its natural gas.
Globally, Thailand ranks 48th in oil reserves and 33rd in production. The country is placed 19th in terms of energy consumption.
"The country's energy reserves will continue to decline, so there is an urgent need to invest in exploration. If exploration cannot be done, then we have to rely on imports," said Mr Tevin.
"Because we don’t have enough of what we consume at home, we have to find it elsewhere and that will come at a higher cost."
Thailand has seven years of proven reserves, and that much is likely to last only 14-15 years at current levels of imports, he said.
Malaysia has 16 years in reserve and as an oil exporter can support a different oil policy, said Mr Tevin.
PTTEP issued US$1 billion in hybrid bonds at 4.8% interest on Wednesday night.
Of the total, 49% are allocated to Asian investors, with buyers in the US and Europe making up 29% and 26%, respectively.
The hybrid bonds were oversubscribed by 5.5 times and will be used for future investments. PTTEP is the first company in Asean to issue investment-grade bonds internationally.
