There will be no shortage of diesel despite tight domestic output as well as lower diesel production in Singapore. However, Thai consumers will have to brace for higher prices amid the continued global increase, caretaker Energy Minister Viset Choopiban said yesterday.

"Despite tight supply, unrest in the Middle East and speculation in oil prices, there will be no shortage as oil could be imported from Singapore, though at a higher price," he said.

Viset said the tight supply would be temporary and if the problem gets more severe, oil companies can ask for the Energy Business Department's approval to temporarily reduce their reserves from 5 per cent of production volume to 1-2 per cent.

Among all types of fuel oil, diesel is in the shortest supply, as Thai Oil's refinery has been shut down for annual maintenance while Singapore refineries have switched from producing diesel to jet fuel to cash in on the higher price.

Sources in the energy business said diesel prices could exceed Bt27 per litre. Backing their assumption is the fact that oil traders now suffer from the negative marketing fee of 20 satang for every litre of diesel sold. If the marketing fee is to be raised to the positive area of Bt1 satang per litre, retail diesel would be priced at Bt27.09, up from Bt25.89 at present.

Except for the recent baht appreciation against the US dollar, oil prices could have been higher, they said.

The baht recently jumped to Bt38.14 against the greenback - a one-year high - as investors expect the political turmoil in Thailand to be settled soon. Traders said at one point the baht touched Bt38.07, the highest level in six and a half years, following a huge sale of dollars in offshore markets.

High oil prices also encouraged speculators to bet on gold - a commodity all investors prefer in times of high inflationary pressure. On Thursday, in the Comex commodity market, gold prices exceeded US$600 (Bt22,875) per ounce - the highest since 1981. Yesterday, it closed at $596.50 in Hong Kong.

According to Metta Banterngsook, director-general of the Energy Policy and Planning Office, Singapore refineries have adjusted their production line to produce more jet fuel and less diesel.

"Jet fuel costs $2-$3 dollar per barrel more than diesel due to the growing demand in the aviation sector. Meanwhile, speculation and closure of some refineries also raised retail prices above the level of previous years," Metta said.

He is optimistic that supply will get back to normal once Thai Oil's refinery resumes its operation and when diesel production in Singapore returns to the previous level. "That should occur when the travelling season comes to an end," he said.

Diesel imports have been expanding fast this year and the situation will continue ahead of the Songkran festival, when millions of domestic travellers are on the move.

According to the Energy Business Department, in February diesel imports rose to 8.2 million litres compared to 6.5 million litres in the previous month. This was during a period of continued increases in global prices.

Agence France-Presse reported that the daily "basket" price, which serves as an Opec reference and is based on crude prices from 11 member countries, hit a historic high of $62.13 per barrel on Thursday.

In Singapore, crude oil futures yesterday closed at $67.09 after the contract briefly topped $68 a barrel in the previous session for the first time in more than two months.

Finished petrol prices in Singapore were $75.8 per barrel while high-speed diesel was $79.98.

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