UPDATE 1-Thailand revamps fuel pricing to correct diesel-gasoline imbalance

Thu Aug 28, 2014 6:42am EDT

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(Adds context, details of Thai fuel usage)

BANGKOK Aug 28 (Reuters) - Thailand's military government has revamped its domestic fuel pricing mechanism, resulting in a reduction in gasoline prices and an increase in diesel prices, the Energy Policy and Planning Office (EPPO) said on Thursday.

The restructuring is aimed at lowering the cost of living for consumers and will be administered through a cut in fund collections from oil retailers by the state-owned Oil Fund and an increase in excise taxes on diesel, EPPO's Director-General Chavalit Pichalai told reporters.

As a result, retail prices of gasoline will fall by 1.0-3.89 baht ($0.0313-$0.1219) per litre while diesel prices will rise by 0.14 baht a litre as of Friday, EPPO said.

This is the first time since April 2011 that Thailand has raised the levy on diesel. The country's retail fuel prices have been distorted by various populist policies introduced by previous governments through the Oil Fund.

Under the current subsidies through the Oil Fund, diesel users pay lower prices at the expense of costly gasoline prices.

In the first six months of 2014, Thailand consumed 376,000 barrels per day (bpd) of diesel and 142,000 bpd of gasoline, according to energy ministry data. Diesel consumption has risen steadily after its price was capped at 30 baht a litre in 2011.

The army seized power on May 22 in a bid to restore order and get the economy back on track after months of political unrest that hurt economic activity. The energy price reform is among the military government's priorities.

Analysts said the military government's plan to reduce the cost of living could imply that an expected increase in domestic gas prices will not happen soon and that could dampen earnings of Thailand's top energy firm PTT Pcl.

Shares of PTT fell almost 3 percent on Thursday due to concerns about the new energy price structure.

PTT, the country's sole gas supplier, has shouldered the loss from fuel subsidies given it has to import liquefied petroleum gas (LPG) at global prices and sell them at the government-fixed price of $333 per tonne. (1 US dollar = 31.9200 Thai baht) (Reporting by Pracha Hariraksapitak and Khettiya Jittapong; Writing by Viparat Jantraprap and Orathai Sriring; Editing by Muralikumar Anantharaman)

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