[bp9QxekG]

Prices just went up again. Why…? Anyone knows the economics here and care to explain? Is it true that petrol price adjustments here follow that in Singapore? Why ain’t Thailand getting petrol from Malaysia where it is so cheap…? Or is the tax on this black oil just so high?

The conditions of having a car with prices of petrol here so high clearly does not match the purchasing capability of Thais drawing their lower then average income (compare to other countries) and yet we still see so many red plated cars added to the roads everyday. I don’t get it.

[themsrsdude]

Short explanation:

The international price of raw oil have increased rapidly hence the prices for fuel is also increasing.

Even if the oil prices are somewhat fluctuating on daily basis almost all oil are traded with longer term contracts meaning these fluctuations won't matter.

Oil prices are increasing period.

Malaysia subside their fuel to with 20-25% within their country, which is why Malaysians have the cheapest fuel in Asia.

Its true that Thailand sets its fuel prices after Singapore, so does Australia as well, and several other countries in the region.

The reason is because Singapore is the closest main refiner of oil. Singapore sets its prices according to the world market (Think of it like the stock market where many follow Wall Street).

I don't recall the exact tax scale on fuel, but I think TH adds a 2-3 bath per liter in tax.

[MgpojuWy]

The prices are so high because they can be. Most commodities are quite easily manipulated.

They can be because people continue to drink the stuff up. Case in point; your second paragraph.

[DexOnenlyCymn]

Gasoline is a prime extract from Crude and everyone wants it so the price can be anything they want and people will still buy it.
Everyone stop buying gasoline for awhile and let supplys stack up to where they have trouble finding a place to put it and watch the price fall to 5 baht per liter.

[Uplillacype]

Oil price movement in Thailand is in the same direction as world oil prices which the market mechanism based on production and some other factors such as speculation, consumption, exchange rates, situation in oil-exporting countries, etc.

Due to my work, I closely watched on NYMEX (New York Mercantile Exchange) crude oil futures in 2004, skyrocking oil prices due to vast speculation from hedge funds and strong global demand. Thai government implemented diesel price subsidy in early 2004 for hoping to maintain the economic growth, but this policy created a huge burden to the government’s state oil fund from the gap between the real diesel price and the subsidized price, thus this policy was ended a year later.

Retail oil prices in Thailand: Bangkok – lowest in the country as Bangkok is the main distribution center. Provincial areas – Bangkok price + transport cost.

Retail oil price structure in Thailand: Refinery price + Tax and Oil Fund + Market Margin.

We import crude oil > refinery process > refined oil products. Refinery price accounts for 60-70% of this price structure, changes in domestic retail prices heavily relied on the movement of world market prices.

Singapore is the regional oil trading center where reflects the real demand and supply in this region.

Soaring oil prices has significant impact on the automotive industry during the past few years, higher demand in eco-cars and fuel-efficient engines. As long as we still have poor public transportation, we will always see red-license plate car on the roads.

[themsrsdude]

From a global viewpoint the new industries of China and India (not to mention a quick growing middle class who wants their own car) and other countries in development will continue to drive the prices.

Sweden has pretty good mass transits but only in the larger cities, if u live outside them you probably want a car. And the commercial transports are based around trucks.

And then you have the fast growing hospitality industry.

And National Security issues (you don't want the police or army run out of fuel do you?)

So prices will continue to increase.

[18holesin]

Commodity dealers also play around with the world price. One a few weeks back in America bought oil at $100 a barrel so he could say he was the first dealer to do so. I believe he sold the oil on at $98 a barrel.

[Uplillacype]

From the old report of National Energy Policy Office:

1. Pricing of Petroleum Products by Thai Refineries Must Be Competitive with Imports from Foreign Sources

A Thai refinery has to compete not only with other domestic refineries but also with imports of petroleum products from foreign sources. Consequently, petroleum product wholesale pricing has to be competitive with the cheapest import price, i.e. the minimum export cost from a foreign source to Thailand. Therefore, the import parity basis, with Singapore market prices as references, has been applied to the determination of petroleum product prices by Thai refineries.

In determining petroleum product prices, if the prices are set higher than the import prices from Singapore, oil traders will prefer imported petroleum products to domestically produced ones. However, if the prices are set lower than the import prices, the rate of return will not be commensurate for oil refineries; hence there will not be adequate incentive to invest in the oil refining business in Thailand.

2. Why Must Thai Petroleum Product Prices Be Based on Singapore Spot Prices?

1) The Minimum Import Cost to Thailand Is Reflected. Singapore market is the largest export market in the Asian region and is the closest to Thailand. The import cost from Singapore is, therefore, the minimum cost challenging Thai oil refineries.

2) The Trade Volume Is Considerable. Similar to New York, oil trade negotiations take place in Singapore by oil trading companies operating their business there while the oil being traded may not be physically stocked in Singapore. The oil trade volume in Singapore is as considerable as those in major markets in other regions (i.e. Europe, America and the Middle East), which makes it difficult for either buyers or sellers to spiral the prices. As a result, Singapore spot prices will reflect petroleum product supply capability and demand in the region.

3) The Prices Reflect Petroleum Product Supply Capability and Demand in Asia. Although Singapore’s total refining capacity is 1.5 million barrels per day, which is lower than that of China, Japan and South Korea, its refining is mainly for export whereas the refining in those countries with greater refining capacity is mainly for domestic consumption, with an export should there be any excess. Given the export-oriented purpose, Singapore spot prices reflect the genuine export costs, which will in turn reflect the petroleum product supply capability and demand in the Asian region.

4) Export Prices of Various Countries Are Based on Singapore Spot Prices. Although Singapore’s oil export volume is declining due to increasing refining capacity in various countries, export prices of those countries are still based on prices in Singapore spot market. Moreover, the trading of oil exports from various countries mainly takes place in Singapore still.

5) Petroleum Product Price Fluctuation in Singapore Market Conforms to the World Market Prices. The National Energy Policy Office (NEPO) has followed up oil price movements in various markets -- in the Middle East, Europe, America and Singapore -- and noticed that the movements of petroleum product prices in those markets are in the same direction and at similar levels. At intervals, prices in some markets may deviate from other markets’ direction or may move at different levels due to the demand and supply imbalance in the markets during those particular periods of time. However, such price differences will cause inflow/outflow of petroleum products from/to other markets until the price level in such markets becomes in balance with other markets. This is due to the fact that petroleum products distributed in every market are universal commodities under the free trade system.

6) Fluctuation of Petroleum Product Prices in Singapore Is Moderate Compared with Other Markets. During the recent years, observations on petroleum product price movements in various markets have revealed that petroleum product prices in Singapore spot market fluctuate at a moderate degree compared with other markets. Moreover, when petroleum product prices in Singapore spot market apparently differ from others, it will take approximately 1-3 days for the prices to regain balance.

3. Appropriate Petroleum Product Pricing by Thai Refineries under the Current Situation

Given the facts that Thai refineries still have to compete with imports from Singapore and that Singapore petroleum product price movements are in line with those in other markets, but with less price fluctuation, Thailand’s petroleum product pricing based on Singapore spot prices is considered the most appropriate for the time being. Nevertheless, since Thailand exports a portion of petroleum products at lower prices than distribution prices in the country, domestic consumers should benefit from the cheaper export prices. Currently, oil refineries have, at intervals, given discounts to oil traders; the latter will then deduct such discounts from their domestic distribution prices in certain areas. If the decrease in distribution prices can be expanded nationwide through a permanent decrease of ex-refinery prices to be close to export prices, consumers will be benefited as a whole.

4. Inappropriateness of Petroleum Product Pricing Based on the Cost-Plus Basis

To determine ex-refinery prices based on the cost-plus basis, taking into account crude oil costs plus fixed refining margins, is considered inappropriate for the following reasons:

1) Crude oil prices fluctuate as petroleum product prices do. Therefore, such a pricing methodology will not be able to mitigate the impacts of retail price fluctuations in Thailand once the market conditions become deviant.

2) If the determination of ex-refinery prices is based on the refining margins of Thai refineries, domestic oil prices will increase because Thai refining margins are higher than those in Singapore. The factors contribute to Singapore’s lower refining margins are as follows:

- The refining capacity of Singapore refineries is greater and more efficient than Thai refineries; hence the cost per unit is lower than that of Thai refineries.

- There are downstream industries in Singapore, hence better rate of return of the refining compared with Thailand.

- Tax collection in Singapore is at a lower rate than that in Thailand.

- Singapore is a port of entry, hence the advantages regarding the availability of the transportation system, fine transportation locations and large-scale ports, all of which yield lower oil transportation costs, compared with Thailand.

Consequently, determination of petroleum product prices based on Singapore petroleum product prices will render benefits to consumers. That is, they can purchase petroleum products at the minimum cost as Thai refineries will have to use a lower cost base than that of Singapore refineries in determining petroleum product prices so as to be competitive with imports from Singapore.

3) Pricing based on the cost-plus basis will distort the competitive conditions of the oil market since the oil costs will not reflect the actual competition. As a result, the import and export will not correspond with the real market conditions. During particular periods, import prices may be cheaper than the prices set by domestic refineries; oil traders will then import oil instead of buying from domestic refineries. On the contrary, if the prices in Singapore are higher than those in Thailand, refineries will gain more profits from exports than domestic distribution; therefore, refineries will try to export oil as much as possible, which may cause oil shortage in the country.

4) To fix the refining margins and revenues of the refineries will create no incentive for Thai refineries to improve efficiency in order to reduce their production costs.

[themsrsdude]

Another thought is the oilproducers.

As long as the price continues to rise or stay high they want to sell as much as possible, however they dont want to overproduce to keep the demand up.

[KongoSan]

It is simply supply and demand, we are past peak oil production and nowhere near peak oil demand. China and India (+others) are expanding rapidly sp demand continues to rise.

Problems in ME and Nigeria are slowing production in the short term, long term the world is running out of oil. As the price of oil increases, other forms of fuel become economic (Bio Fuel) which uses large tracts of farmland. The demand on farmland for fuel cause less to be used for food and so food supply goes down and the price goes up causing widespread starvation.

We are living in the last years of the carbon golden age, I intend to have fun while I can.

[adverwork]

Prices just went up again. Why…? Anyone knows the economics here and care to explain?

Because people buy it, if people stopped buying you can bet that prices would fall.

David

[Les Allen]

Sorry... on behalf of India...LOLz

Of course, there are many views here. The people who already consume a lot of gas are also in a position to contribute. They cannot take it as a right. So, is one view.

In the end its a joint responsibility, which everyone has to own up. But I think its going to be hard. Because at one end, if you tell anything to India and China we take on the complex of being a 'victim' and we take little responsibility on adopting more efficient means. And if you say anything to a country like US, it seems you are attacking their way of life?

Carbon footprints, fuel and more is going to follow and I guess we are all going to be in it !!!

[LesLattis]

> The people who already consume a lot of gas are also in a position to contribute. They cannot take it as a right.

personally, I would contribute willingly to increasing fuel prices if the profits were used to develop alternative resources. or, I would willingly pay a lot more for food if I knew it was helping poor families keep their means of living. but this just doesn't seem to be the case. someone's getting filthy rich with the profits they are getting off normal or poor people and THAT annoys me to bits.

[PetraCromlich]

you want you pay its as simple as that.

[Uplillacype]

This market mechanism is getting more complicated, besides demand and supply I would think of "manipulation/speculation" as one major factor of this hike too.

[HexcewlyRette]

This market mechanism is getting more complicated, besides demand and supply I would think of "manipulation/speculation" as one major factor of this hike too.

And it's easy to speculate on the future price considering the pattern that has been established, as much as I would like to see the speculators lose their butts, the chances of that happening seems very slim at this point.

[themsrsdude]

This market mechanism is getting more complicated, besides demand and supply I would think of "manipulation/speculation" as one major factor of this hike too.

In my country we have like what? 4-5 large oilcompanies who charge the exact same price per liter down to the last satang and they always adjust the price the exact same day

[18holesin]

In my country we have like what? 4-5 large oilcompanies who charge the exact same price per liter down to the last satang and they always adjust the price the exact same day

In the UK that would be illegal-but that is not to say it does not happpen...

[themsrsdude]

In the UK that would be illegal-but that is not to say it does not happpen...

Its illegal to do that in Sweden too, having some kind of cartell.

... so it happens just by a coincidence

[occafeVes]

I hope this helps a bit from OZ
Fuel: The Mass Debate
Or How to Knock About 50c a Litre Off the Price Of Fuel
First and foremost this debate should be centred on Diesel NOT Unleaded. Why? You may ask. Just look at the increase in supermarket prices for your answer. While it may cost you $5 or $10 extra to fill your tank everything that is transported (which is everything) rises as Diesel rises. My average basket at the supermarket per week has increased on average $30 and that’s for one person. Australia’s whole economy is tied to Diesel and therefore it should be afforded the same priority and status as water i.e. an essential commodity.
I own a small transport company and I have had to significantly raise my prices twice in the past year just to maintain profit margins. This cost you money too.
I am compelled to write this letter because I am sick of all the namby-pamby pussyfooting around everyone seems to be doing about the current fuel debate. I have spent considerable time researching this area because it affects my income. Contained herein is the WHOLE truth about the debate, the WHOLE big picture, if you will. NO-ONE till now has had the testicular fortitude to stick their necks out and present the WHOLE argument about just how much we are being RIPPED OFF. If you want the truth and the WHOLE truth read on.
DON’T – Listen to spin doctors from the oil companies. THEY HAVE A VESTED INTREST TO KEEP FUEL PRICES HIGH.
DON’T – Listen to the government – state or federal. THEY HAVE A VESTED INTREST TO KEEP FUEL PRICES HIGH.
DON’T – pay too much attention to news or current affairs programs. THEY HAVE THEIR OWN AGENDAS.
So here we go, how to make fuel cheaper!
FIRSTLY – DISBAND FUEL PARITY
Parity, for those that don’t know, is government sanctioned price fixing (simple as that). Parity allows fuel companies to sell their products for the highest current price they find in the Asia Pacific region. It completely disregards supply and demand economics and eliminates any need for competition amongst themselves.
Don’t believe me? Just look at the price of Diesel. If you remember growing up when Diesel was always 10-15c p/l cheaper than Petrol you might understand this more.
How can a product that costs far less to produce (partially a by-product of producing Unleaded as well) and a product that Australia uses more of than any other fuel be MORE EXPENSIVE than Unleaded? Simple, ring Singapore, where they don’t use a lot of Diesel and import all their fuel, find out how much it’s selling for there and charge the same here – sound fair? NOT!
Any other industry who tried this one would be hauled of to the High Court quick smart and prosecuted for price fixing! Oh but hang on, our government ALLOWS them to do this
NUMBER TWO – BARRELL PRICE
That price the news loves to show us each night is the PREMIUM GRADE crude oil price. Australian oil companies DO NOT buy PREMIUM GRADE crude oil! In fact Australia produces around 70% of its own oil and imports about 30%. The cost of production per litre produced here is cheaper than that of imported fuel, but in no way is this factored into the pump price, because they don’t need to (SEE PARITY ABOVE) we pay a pump price based on PREMIUM GRADE crude oil price the same as if we imported all of it, say somewhere like Singapore! Starting to get the picture?
NUMBER THREE – LEVIES
Everyone knows that both State and Federal Governments take a large slice of the cost of a litre of fuel. This equates in total to about 46% of the price per litre. This money is used for infrastructure, road trauma etc. etc. so fair enough right? WRONG!
What is wrong is that it is a PERCENATGE! Look at this. If a litre of fuel costs $1.00 then the Government gets 46c p/l, right? A week later fuel rises to $1.10 p/l; the Government gets 50.6c p/l, bingo! Something tells me that in one week, their costs, IN NO WAY have gone up 9%!
As I stated previously – THE GOVERNMENT HAS A VESTED INTREST TO KEEP FUEL PRICES HIGH. THEY MAKE LOTS MORE FREE MONEY! Why else do they allow fuel companies to maintain PARITY?
If they changed the tax (sorry, levy) to a flat rate tied to the GDP then the fuel price would drop drastically and immediately!
NUMBER FOUR – GST - THE DOUBLE DIPP
Now this one is outright “THIEVERY” and also applies to cigarettes and alcohol.
GST = Goods and Services Tax, correct?
46% or 46c in every dollar in the price of a litre of fuel is TAX (sorry; again, LEVY).
What part of LEVY is a good or a service? YOU CANNOT TAX, TAX RIGHT? WRONG!
You do the math.
Say fuel costs $1.00 p/l – the GST component = 9c
But hang on a minute 46% or 46c of this is TAX!
i.e., 4.14c of the GST is ILLEGALLY CHARGED ON THE TAX COMPONENT! Not much you say?
FOR EVERY LITRE SOLD IN AUSTRALIA EVERY DAY!
That equates to millions of free dollars for the Government! I’ll say it one more time - THE GOVERNMENT HAS A VESTED INTREST TO KEEP FUEL PRICES HIGH. THEY MAKE LOTS MORE FREE MONEY!
The GST on fuel should be 5.4% not 10%. At $1.75 p/l this would drop the current price by around 8c p/l.
Feeling a little annoyed? You should be!
Even without disbanding parity and introducing real competition among fuel companies, you should be paying about 40c less per litre!
I happily welcome anyone, Government and fuel companies included to prove me wrong.
If you feel strongly about this issue then pass this missive on to everyone in your address book. Eventually someone might take notice.