Thai PTT calls for end to fuel subsidies
Source: 08-AUG-2008 Intellasia | Reuters
Aug 8, 2008 - 7:00:00 AM Governments should remove fuel subsidies and educate consumers about current high prices, as state-run firms cannot cope with high costs and growing demand, the head of Thailand's PTT said on Wednesday.

"Many governments have been trying to protect people by using subsidies and encouraging companies not to pass the full oil prices," said Prasert Bunsumpun, president and CEO of PTT PTT.BK told the Asean Energy Business Forum 2008.

"However, this policy is difficult to maintain. The public also needs to understand the issue and to overcome future challenges."

To ease the burden of subsidies during oil's rally, when prices hit a record of US$147.27 a barrel last month, Indonesia, Vietnam and Malaysia sharply raised gasoline and diesel prices.

Thailand started phasing out its subsidy of 0.4 baht (US$0.012) a litre of diesel on Saturday.

But as crude plunged almost US$30 from their peak, Malaysia was looking to lower prices as it sought to put a market-linked system in place.

Bunsumpun said that Thailand, which has already deregulated most of its domestic fuel market, should go further and let domestic LPG prices rise to international levels.

"The government should increase the price of LPG or demand will grow rapidly, and for the time being we don't have the capacity to handle it," Bunsumpun told Reuters on the sidelines of AEBF 2008.

Thailand, which used to be a net LPG exporter, turned a net importer in April and will import between 400,000 and 500,000 tonnes this year.

"Maybe next year, we will have to import 1 million tones (if prices are not raised)," Bunsumpun said.

Demand for LPG in Thailand is rising by 10-15% a year because prices are low and many vehicles are being converted to run on LPG.

Bunsumpun said diesel subsidies, which are being phased out, were not a big issue as they concern only limited volumes.