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Cut oil tax, reduce inflation?

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No plans to lower prices at major companies. Global oil prices volatile with tendency to rise further. Oil only one factor among many. 

oil storage

Photo above of oil storage drums at Shell's storage depot on the Chao Phraya river in Klong Toey, Bangkok.

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Economics: FUEL PRICE CUTS, Goods prices unlikely to fall by Post Reporters


Despite high expectations for lower goods prices following a sudden cut in oil prices, the government and businesses are less confident things will get cheaper soon.

Deputy Prime Minister Kittiratt Na-Ranong admits the reduction may not be as effective in curbing inflation as expected.

The government last Friday cut the levy collection to the state Oil Fund by 8.02 baht per litre for premium petrol, 7.17 baht for regular petrol and three baht for diesel, resulting in proportional price drops for the three fuel types. The move, however, has drawn heavy criticism from major oil companies.

Mr Kittiratt explained that the government could not force manufacturers to cut prices despite the lower fuel costs.

Mr Kittiratt, who is also the commerce minister, is also counting on the private sector's cooperation in increasing the minimum wage to 300 baht a day.

But Saha Pathanapibul Plc, the manufacturer of Pao brand detergent and several consumer products, has no plans to lower its product prices because the oil price cuts are only temporary, said president Boonchai Chokwatana.

He said global oil prices were very volatile, with a high tendency to rise further.

"Oil is only one factor among many that affect our production costs. If the diesel price falls to 25 baht per litre and remains at that level for a longer period, it might be possible for us to reduce consumer product prices," he said at an economic forum held by the Federation of Thai Industries yesterday.

Mr Boonchai warned that the commerce minister should not try to force manufacturers to lower their prices if he had a good understanding of the business and pricing structure. Lower oil prices will not have a significant impact on overall operating costs and prices.

Like the Saha Group, Unilever (Thai) Trading Co, the manufacturer of many consumer products including Sunsilk shampoo and Omo detergent, has no plans to slash its price tags, said an executive who declined to be named.

On the contrary, the company is awaiting positive responses from the Internal Trade Department to its request to raise the prices of many of its products in keeping with rising costs.

But Siam Cement Group (SCG), Thailand's top industrial conglomerate, has a different view.

President and CEO Kan Trakulhoon said lower oil prices would help trim SCG's logistics cost for cement by 4-5% and prices of cement and other building materials might go down as a result. However, SCG's energy costs remain high due to skyrocketing coal prices

(Source: Bangkok Post, Economics, FUEL PRICE CUTS, Goods prices unlikely to fall, 31/08/2011, Post Reporters, link

Oil prices and inflation vocabulary

effective - works well, gets the job done; producing the result that was intended ได้ผลดี
expected - believe will happen คาดว่า (จะเกิดขึ้น)
expectations - การคาดคะเน

not as effective as expected - thought it would work better (but didn't do what they thought it would do)

curbing inflation - reducing inflation or stopping inflation
not as effective in curbing inflation as expected - they thought that it would reduce inflation, but it doesn't (at

confident - being certain of your abilities or of having trust in people, plans, or the future มั่นใจ

inflation - the level of prices rising in the economy as a whole (See Economist Glossary) ภาวะเงินเฟ้อ

levy - tax
levy collection - tax collection
state - government รัฐ

state Oil Fund - a monetary reserve kept by the Thai government used to maintain domestic retail price levels at a set ceiling in times when global petroleum prices soar, subsidizing domestic oil producers and importers (Source: UNESCAP)

cut the levy collection to the state Oil Fund - cut oil taxes collected by the government

fuel - a substance such as oil, coal or gasoline burned to produce power or heat
premium - special features or service that you pay extra for
premium petrol - higher quality but more expensive gasoline
regular petrol
- normal quality gasoline, normal average price
diesel -
a cheaper fuel used in large trucks

proportional price drops - if taxes dropped by X% then prices would drop by the same amount

the move has drawn heavy criticism -
the action has led to claims that the action was not a good thing to do

force X to do Y - make X do Y (cause X to do Y by saying "If you don't do Y, I am going to do something bad to you," so they really have no choice)
force manufacturers to cut prices - tell companies they must decrease the price of their products (or some action will be taken)

X counting on Y - X relying on Y, X depending on Y, X needs and expects Y to happen

private sector -
all the privately owned businesses in the economy
cooperation
- a situation in which people or organisations work together to achieve a result that will benefit all of them การร่วมมือกัน

wage
- an amount of money that you earn for working, usually according to how many hours or days you work each week or month ค่าจ้าง
minimum wage - the lowest amount of money that a worker can legally be paid for a day's work

brand - a type of product made by a particular company ตรา, ยี่ห้อ
detergent - a chemical substance in the form of a powder or a liquid for removing dirt from clothes or dishes, etc. ผงซักฟอก

consumer
- someone who buys and uses goods and services ผู้บริโภค
consumer products - products that families and individuals typically buy (everyday things such as cleaning products, as well as infrequent purchases such as refrigerators and TVs)

temporary
- done or used for only a limited period of time, i.e., for a limited time, not permanent ชั่วคราว
global - throughout the world, all over the world ทั่วโลก ทั้งโลก  

volatile
- changing quickly and unpredictably, the public does not know how to react and plan for the future เปลี่ยนแปลงอย่างทันทีทันใดและโดยคาดการณ์ไม่ได้ ที่เปลี่ยนแปลงได้ง่าย ที่ปะทุได้ง่าย
volatile prices - prices that move up and down by large amounts suddenly เปลี่ยนแปลงอย่างทันทีทันใดและโดยคาดการณ์ไม่ได้

factor - a fact or situation which influences the result of something ปัจจัย
only one factor among many - temporary falls in the price of price of oil is only one thing (factor) that will determine the price of oil in the future

production costs - the money that a company must spend to produce a product (raw materials, labour, capital)

forum
- a place where people can express their ideas and opinions; as well as debate issues การประชุมแสดงความคิดเห็น

significant
- large enough to be important or have an effect ที่สำคัญยิ่ง
impact - an effect or influence ผลกระทบ
significant impact - an important effect

slash
- (of a budget, price, etc.) to cut, especially by a large amount ตัด
slash its price tags - reduce and cut prices by a large amount

executives
- the highest level managers in a company

declined to be named
.- commented but did not want to give his name

contrary - the opposite ทางตรงกันข้าม
on the contrary, ... - the opposite is true, ...

positive
- 1. saying "yes" or agreeing with someone; 2. being hopeful and confident, or giving cause for hope and confidence ซึ่งมองในแง่ดี
awaiting positive responses - waiting for them to say "yes" (waiting for approval)

conglomerate
- a large company joining together a group of companies with different business activities
industrial conglomerate - a large company that owns smaller manufacturing companies (industrial companies)

logistics
- transporting, tracking, and storing goods in a warehouse between factory and store (See Wikipedia) การขนส่งและจัดจำหน่ายสินค้า

trim - ตัดบาง cut by a small amount
trim costs - decrease costs a little
trim logistics costs - decrease transportation and storage costs a little

energy costs -
the cost of electricity, heating and gas for cars and trucks

skyrocketing
coal prices -
coal prices that are increasing very quickly by large amounts

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