A gas station in Khon Kaen’s Thung Sang district puts up a ‘sold out’ sign on a diesel pump. Thai oil companies will consider today if they need to jack up retail prices.

PTT Plc is seeking to draw down the country's domestic diesel reserves to ease shortages that have sparked an uproar among truck and bus operators, the fishing industry as well as motorists who cannot refill their fuel tanks.

According to the Energy Business Department, Thailand's largest oil company has sought an approval to cut its reserves, which are required to be 5 per cent of total sales.

Two weeks ago, the Energy Ministry mentioned the possibility of a reduction in the legal diesel reserve requirement to ease the supply shortage.

"PTT is the only company that asked for the approval on the expectation that diesel demand in April at its petrol stations nation-wide will increase from 537 million litres to 545 million. It aims to reduce the reserves by 2.1 per cent," said Panich Pongpirodom, the department's director-general.

If approved, the new reserves will stay at that level for one month. The department expects to consider PTT's request in one or two days.

Panich still insisted yesterday that Thailand was not short of diesel supplies, despite reports during the Songkran festival that some consumers were turned away from petrol stations. Panich did admit that some stations had refused to fill up spare cans, but not vehicles' tanks.

If its reserves are not adjusted downwards, PTT will need to import more diesel immediately at a time when global oil prices have resumed their upward cycle, amid fears that imports would further widen the country's trade deficit.

Yesterday, crude oil futures in Singapore hit US$70 (Bt2,653) a barrel for the first time in seven-and-a-half months, lifted by concerns over declining gasoline stocks in the US, supply disruptions in Nigeria and tension over Iran's nuclear programme. The last time crude futures surpassed $70 a barrel was on August 30, when they traded at a record $70.85 a barrel after Hurricane Katrina struck the US Gulf coast.

Thai oil companies will consider today if they need to jack up retail prices - a move that was delayed before the Songkran festival.

Chaiwat Choorit, senior executive vice president of PTT, said that at present the company was recording a 50-satang negative marketing fee for every litre of petrol sold at the stations and a 30-satang negative fee for diesel. He added that PTT had halted wholesale trade of all fuels to make sure that all stations of PTT are adequately supplied.

 "But we would not raise retail prices by as much as 80 satang per litre, as reported, to minimise the impact on consumers," he said, adding that the retail prices are likely to be raised by 40 satang per litre.

After the increase, octane-95 petrol prices will climb to Bt28.34, octane-91 to Bt27.54 and diesel to Bt26.69.

Other oil companies are expected to follow PTT's move.

Anusorn Sangnimnual, president of Bangchak Petroleum, said he preferred a 15-satang increase in retail fuel prices rather than the 40-satang rise. "We can opt for a lower increase at a time, but the price could be raised more frequently," he said. "The lower increase will not shock consumers and it will better reflect global prices."

To reduce oil imports, the Energy Ministry is implementing measures to cut imports by 5 per cent from the 2005 level, when an average of 828,000 barrels were imported daily.

Deputy Energy permanent secretary Pornchai Rujiprapha said there were discussions with crude oil producer and refiner Thai Oil, to refine more locally sourced crude oil.

"We concluded that an additional 61,000 barrels of onshore and offshore crude oil could be refined, to bring the total volume to 130,000 barrels. This should reduce oil imports by billions of baht," Pornchai said, adding that last year the country's oil import bill reached Bt650 billion.

Additional crude oil will come from the Thantawan and Benjamas fields, which are operated by Chevron. To refine the oil which is normally exported, Thai Oil needs to invest about $100 mil?lion-$200 million in new refining technology.

Coupled with lower consumption due to higher oil prices, crude oil imports in the first quarter dropped to 825,000 barrels per day on average, down by 3,000 from the 2005 level.

 Pornchai of the Energy Ministry is confident that diesel imports will drop after April, when demand increased due to heavy travel schedules for the Songkran festival as well as the transportation of harvested agricultural products.

"Oil prices are much more expensive than our forecasts," he said. "Against our forecast of $50 per barrel, Dubai crude oil price is now $63 and many institutions expect it to rise to $70-$80. Still, we don't have a policy to stabilise diesel but will focus on the campaign to reduce consumption."

High oil prices have prompted truck and bus operators - who depend entirely on diesel - to consider raising service fees to cover the higher costs.

The association of northeastern truck operators called for a meeting yesterday to consider an increase of 10-15 per cent in service fees, which were fixed when diesel was at Bt20 per litre.

Surachan Kanakapinta, registrar of the association, said that if the association's proposal failed to receive official endorsement, truck operators could launch retaliatory measures including a mass gathering of trucks.

Suwit Tanvichit, chairman of the association of bus operators, also considered a meeting with members, who own about 7,000 of the more than 10,000 buses that offer tour and shuttle services.

"We barely cover our operating cost," he said. "Some operators are tied up in contracts struck for an annual period, which bound them to operate services at the old price. Some offer shuttle services for factories, but that might stop soon as they cannot cope with the escalating costs."

 Sawai Jesyakom, vice chairman of the Songkhla fishery association, said that some fishing boats in the province bought illegal diesel from ships in international waters at a price if Bt21.30 per litre.

 "The government's subsidy programme helps only small boats, not large boats which operate far from shore," he said. "Right now, over 600 fishing boats have halted operations and, without state assistance, more will follow. This will result in a chain reaction upon related industries like seafood processing plants and their workers."

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