Thursday, October 18, 2007

Global hike likely to lift retail price of diesel

Bangchak expects move this week
The retail price of diesel is likely to increase this week due to the continued spike
in global oil prices, which will deplete retailers' market-ing margins,
a Bangchak Petroleum executive said yesterday.
The prediction came amid the surprise adjustment in oil futures in New York on Tuesday,
when the price of crude for November delivery reached a record high of US$88.20 (Bt3,043) a barrel,
before closing at $87.61. Dubai crude touched $78.34.

REF: FUEL COSTS Published on October 18, 2007 Business Reporters The Nation

Though oil futures retreated slightly to $87.42 by noon yesterday in Europe in electronic trading on the New York Mercantile Exchange, the high level indicates a possible increase in retail oil prices, which would make it unavoidable for manufacturers and service providers to raise their prices.

Vichien Usanachote, senior executive vice president of Bangchak, said that as finished diesel had climbed $2.18 in a single day to $96.04 a barrel on Tuesday, PTT - the largest oil retailer - would be unable to delay the retail price increase.

"It is likely that global oil prices could touch $100 a barrel some time, due to unrest in several areas like Turkey and Iraq," he said.

However, PTT senior executive vice president Chaiwat Chooritti said yesterday that the company would put on hold another increase in retail diesel prices, fearing that an increase this week would further disturb consumers who are suffering from higher product prices.

He said if global oil prices kept escalating this week, the company could consider raising retail prices next week.

"While fluctuations in oil prices attract hedge funds, all parties now hope that the Organisation of Petroleum Exporting Countries will increase output at its November meeting to ease the price situation," he said.

Also yesterday, ferry and boat-service operators along the Chao Phya River failed to win the Marine Department's permission to lift fares, though private bus operators raised their fares on Monday and truck operators will raise their freight rates on November 1.

Marine Department director-general Prasong Tanmaneewatana said the agency would review the fares once diesel climbs further. Right now, the boat operators are recommended to adjust their frequency and switch to

Natural Gas for Vehicles (NGV) to generate more revenue and save fuel costs.

"NGV can reduce fuel costs by 30 per cent," he said.
At the time of the last increase in August 2005, it was agreed that basic boat fares would be maintained at Bt2-Bt3, as long as the average diesel cost was Bt21-Bt25 per litre. The department said that during the first 10 months of this year, the average diesel price was Bt25.04 and that had prompted it to delay the increase.

Energy Minister Piyasvasti Amranand said yesterday that the government would never intervene in domestic retail oil prices except in emergencies, such as war in the Middle East.

He said intervention would cause a long-term debt burden to the Oil Fund, which is due to be free of all debts - incurred from intervention during the Thaksin Shinawatra government - at the end of the year.

Piyasvasti also calmed the market worries on oil prices, saying that the volatility is due to tight supplies. Even though the world price could hit $100, it would only be for a short period, he said.

"The average crude-oil price still stands at $60 a barrel," he said. "The retail diesel price is still lower than last year's peak of Bt29.75 per litre. The average price in the first nine months of Bt24.73 is also lower than last year's average of Bt25.62."

He also advised consumers to switch to NGV, for which the price would be maintained at Bt8.50 per kilogram until the end of next year.

PTT now targets to have 50,000 NGV-fuelled taxis at the end of the year, from 16,000 at present, under a Bt2-billion programme. It also hopes to have 220 NGV stations by the end of the year.

Piyasvasti said oil prices were not the only factor driving up transport costs and product prices. Inflation can be blamed on many factors, including seasonal increases in food prices.

Oil prices retreated yesterday in Asia to $87.12 a barrel amid expectations a fuel report due later in the day would show that US crude and petrol stocks rose last week.

Prices remained supported by concerns that a Turkish incursion into Iraq in search of Kurdish rebels could disrupt crude supplies.

Turkey's parliament was expected yesterday to agree that the government could launch a cross-border attack into Iraq sometime over the next year. An incursion would threaten the pipeline that runs from Kirkuk in Iraq to the Turkish export terminal of Ceyhan.


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