Thailand--(Oil Update) Government Resists Call To Intervene

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GOVERNMENT RESISTS CALL TO INTERVENE

Policy supported by leading economists

March 9, 2000 - Bangkok Post

The government has insisted it will not cut oil tax or subsidise oil products to bring down local retail prices, despite mounting pressure and rocketing charges, which increase by another 0.40 baht today.

The government's policy has been widely supported by several leading economists who say that a reduction of oil tax would not only worsen the government's fiscal position, but also distort the local oil market. Prime Minister Chuan Leekpai said he was confident that oil prices would not stay high too long.

Yesterday he told all ministries concerned to convince private operators not to increase the prices of their services or products. Political analysts, however, noted that it is important for the government to curb increases in the prices of goods. If it fails, the government's stability could be affected.

It is generally agreed that there is no measure to prevent oil prices from rising as it is an external factor. Economists therefore urged the government to implement measures to control local goods prices instead. However, an economic adviser to Prime Minister Chuan Leekpai said it was impossible to prevent all prices from rising, and she would recommend that the government impose measures on selective sectors.

According to Industry Minister Suwat Liptapallop, the Petroleum Authority of Thailand, the local oil market leader, will raise its retail price again today by 0.40 baht a litre to 15.99 baht for premium petrol, 15.19 baht a litre for regular petrol and 12.82 baht for diesel oil.

The move is unprecedented as it will be the third time in a week for retail prices to go up. Local oil prices went up 0.30 baht a litre last Friday, again by 0.30 baht on Tuesday, and another 0.40 baht today.

Adul Leelapatranuruk, acting president of PTT Oil, part of PTT, said an increase was inevitable as the world oil prices jump and the marketing margins would dwindle to a mere 16 satang a litre if no adjustment is made. The optimum marketing margin oil companies and dealers want is about 1.20 baht a litre.

The price of Dubai crude soared to US$28.41 a barrel yesterday from $26.45 last Monday; with the posted price of premium petrol in Singapore soaring to $37.45 a barrel from $35.95 and diesel to $36.93. The jump in world oil prices came amid growing uncertainty over whether Opec will increase production.

The low US crude oil stock, the lowest in 24 years, has also fuelled the increase in world oil prices, Mr Adul said.

Meanwhile, several oil refineries in this region have undergone maintenance shutdowns or have reduced production, driving up prices. Oil refineries in Australia and India have been closed for maintenance while some facilities in Singapore have curtailed production, prompting countries like Indonesia, Australia, Vietnam, the Philippines and China to compete for more supplies.

As oil prices soar rapidly, Mr Suwat, also the secretary-general of the Chart Pattana Party, has helped spearhead calls for the government to implement measures to slow the increase in local oil prices.

However, his recommendations, such as tax cuts, have been turned down by ministers of the Democrat Party, including Finance Minister Tarrin Nimmanahaeminda and Savit Bhotiwihok, the Prime Minister's Office minister supervising energy policy.

Informed sources noted that Mr Suwat was not happy with the Democrat Party's attitude. However, leading economists like Nimit Nonthapunthawat, executive vice-president of the Bangkok Bank, also disagreed with any oil tax cut. "I think oil prices are not the major concern as they move in line with the world situation. They could go up or down. However, when prices of other goods are increased, they never come down again after oil prices fall," Dr Nimit said.

The Commerce Ministry has already approved price increases for 12 goods, including lubricants, soy sauce, instant coffee, soya cooking oil, semi-finished foods, medicine, seasoning powder, pesticides, concrete roof tiles, nails, electric wire and portland cement.

Commerce ministry officials said that no formal price-increase requests from manufacturers of these products were submitted to the ministry yesterday. A source at Jalaprathan Cement Plc said the company planned to raise the portland cement price by 150 baht per ton or 6.88%.

http://www.bangkokpost.net/today/090300_Business01.html ================================

-- Dee (Dee360Degree@aol.com), March 09, 2000


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