"Right now, with insufficient supplies, we have no plan to abolish octane-95 sales. This should be fair to motorists who own old cars, as auto companies have not yet guaranteed that gasohol 95 can replace octane-95 petrol without causing trouble," said Energy Minister Piyasvasti Amrananda.

"Without the delay, oil retailers would be captive clients of the four ethanol plants," he noted, adding that the ministry is in the process of basing local ethanol prices on world prices to create a fair environment for both ethanol producers and fuel oil retailers.

He said that the previous government's gasohol promotion policy was not sustainable through fixing a date to end octane-95 amid low supplies of ethanol - the ingredient to take the place of the imported MTBE which is mixed with petrol at a 10:90 ratio.

Ahead of the original deadline to scrap the sale of octane-95 gasoline, the ethanol price rose to Bt25.30 per litre, compared to a production cost of Bt15 per litre. The delay from the original deadline of January 1, 2007, thus turns the situation into a buyer's market.

According to Energy Permanent Secretary Pornchai Rujiprapha, the ethanol price is supposed to be based on investment and raw material costs, and ethanol prices quoted in Chicago and Brazil. However, the January 1 deadline distorted the pricing system.

Still, Piyasvasti and Pornchai both believe that ethanol investment will continue as an alternative amid high fuel oil prices. "The number of new ethanol plants should depend on long-term returns. High prices are an attractive factor to draw investment but recently, ethanol prices were too high to affect the cost of gasohol production," Pornchai said.

He noted that in the first quarter of next year, ethanol output should be one million litres a day as new plants are completed. Then the government would be more active in boosting gasohol-91 and gasohol-95 to reduce the consumption of conventional octane-91 and octane-95 petrol.

Piyasvasti noted that once ethanol output increased, the Oil Fund may be used to subsidise gasohol-91 to ensure that it is priced Bt1.50 per litre lower than octane-91.

Krisnapong Komolboon, executive vice president of PTT, said that the delayed abolishment of octane-95 gasoline helped to push down ethanol demand. As such, PTT's stock is enough for three months.

 "Before, ethanol was quoted at B25.30 while octane-95 was Bt30. When fuel prices eased, ethanol producers wanted the same price. If the Energy Policy could create a pricing standard that is fair to buyers and sellers, it should be easier for future transactions," Krisnapong said.

Pornsilp Taemsirichai, senior executive vice president of the Khon Kaen Sugar Group - one of the ethanol producers - said that his group was now waiting for the government to scrap the octane-95 petrol sale as that would help push up ethanol demand. As output should exceed 800,000 litres per day in February, the government should then be clear about what it will do with the gasohol policy, he said.

"Certainly, if the ethanol price is based on world prices, it should be fair to both sides. So far, the costs of each plant are not similar and thus it is impractical for all plants to quote a similar price," he said.

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