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Fuel prices edge up as diesel subsidy gets approval


March 13, 2008

Fuel prices edge up as diesel subsidy gets approval

Thailand’s National Energy Policy Council (NEPC) gave green light to the Energy Ministry’s plan to revive the diesel subsidy cutting retail prices by three percent as prices of fuels continue to rise.

The subsidy, which lowers diesel pump prices by 0.90 baht a litre, may again be increased by 1.30 baht a litre if global crude costs did not fall in April when cold weather in Europe was expected to ease, an energy ministry official was quoted as telling local media.

Fuel prices rose by 50 satang per litre (1 baht = 100 satang) at the pump Thursday morning as a result of skyrocketing crude oil prices in international markets, which reached $109.72 a barrel on Tuesday.

The subsidies cost the country’s treasury 92 billion baht ($2.92 billion) in the 19 months to July 2005, to prevent "chain reactions" in the economy as global oil prices kept rising.

According to Deputy Prime Minister and NEPC chairman Sahas Bunditkul, the diesel price subsidy will have cost the state about 100 million baht by July this year.

Thailand’s oil subsidy plan is seen as going against the regional trend as major oil subsidising countries like India and China roll back their intervention schemes.

As global oil prices keep climbing, Thai government has put pressure on state-run PTT and Bangchak Petroleum, which have a combined market share of more than 30 percent, to delay raising pump prices. PTT and Bangchak sold diesel at 29.94 baht ($0.95) per litre in Bangkok on Wednesday, 0.50 baht cheaper than other suppliers.

Thailand, which produces only a seventh of its daily crude consumption from domestic fields, imported 798,408 barrels per day in 2007, 3.3 percent less than in 2006 due to switches to cheaper biofuel and natural gas, Energy Ministry data showed.

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