Lpg for vehicles set for price rise early next month

If things go as planned, liquefied petroleum gas (LPG) for vehicles will rise in price early next month, while the price of the same gas for household use will be maintained until the end of next January.

While the government hopes the price hike will discourage the use of LPG in vehicles, energy industry experts say the increase is too small. Instead, they say the price should be raised across the board and measures introduced to help those affected.

Reports suggest LPG for vehicles, commonly known as autogas, could cost an additional Bt10 per kilogram, while its price for household use would remain at Bt18.13. At the present global price of US$920 (Bt30,700) per tonne, the retail price should be about $1.09 a kilogram, to reflect its actual cost. Filling up LPG tanks would then cost about Bt32 a litre (given that 1 kilogram equals 1.04 litres).

"People in Europe are asking me why Thailand has never learned from others' lessons. Subsidies result only in a steep state burden and do not lower energy consumption," said an energy expert who asked not to be named.

Around the world, LPG has been an attractive alternative energy, due to its cheaper price and cleaner exhaust emissions than petrol. Early this decade, the UK encouraged conversion of vehicles from petrol to LPG, foreseeing the rise in petrol prices. At that time, motorists were entitled to a $2,000 rebate on the cost of conversion, and a $1,000 rebate on new factory-fitted LPG vehicles.

However, in Thailand the government has never encouraged the use of LPG in vehicles, and it is easy to understand why. First, LPG - better known here as cooking gas and elsewhere among motorists as autogas - is hugely subsidised, because it is reserved mainly for household use. Second, Thailand is tapping its own vast reserves of natural gas. Since LPG is a petroleum by-product, it is better for a country where 90 per cent of crude oil is imported to cut those imports by switching to the locally sourced product.

Despite all of this, the government's heavy subsidies have boosted the use of LPG in vehicles, and even though the price is set to rise, Bangkok motorists continue to queue up at LPG stations. They say is it is more convenient to find an LPG filling station than one selling natural gas for vehicles (NGV), because most of these seem to be outside of the city area.

Based on the country's refining capacity for crude oil of 1 million barrels per day, LPG outputs from refineries vary from 5-8 per cent of this figure. About 7,000 tonnes of LPG per day also comes from gas-separation plants handling about 60,000 barrels of natural gas a day.

In all, Thailand's LPG output amounts to 3 million tonnes a year. However, demand has now risen to 3.5 million tonnes, and Thailand, which was once a net exporter of LPG, began importing the gas in April.

It is conservatively estimated that Thailand will import more than 300,000 tonnes of LPG this year and nearly 1 million tonnes next year if the government's subsidy remains in force.

PTT, the only importer of LPG, says so far it has not been affected financially by the yawning difference between the global price it pays and the domestic price it receives. However, with estimated unrealised losses from the LPG trade reaching Bt60 billion this year, there is no telling when PTT's burden will be cleared. Thailand was lucky to clear oil subsidies of nearly Bt90 billion in a year, but that concerns motorists and not household consumers, who are relatively poorer.

This situation would not have occurred if demand for LPG from vehicle-owners and industrial plants had not skyrocketed. Household consumption remains at 60 per cent of output.

Due to continuously rising oil prices - which in turn raises LPG prices - the previous government planned to end the LPG subsidy with a five-step plan. However, the plan never advanced beyond the first step.

The Samak Sundaravej government is also reluctant to lift the gas price for fear that household users will suffer. For a month, it has been working on measures to halt the conversion of vehicles to household gas.

Another energy expert agreed the price of LPG should be lifted across the board and that the move should be made now.

"If the government is concerned about household users, it could still subsidise their use, but in a different way," he said.

The expert suggested the government survey household gas consumption and offer a cut in electricity bills as a subsidy.

An Energy Ministry source said the government could give rebates to buyers returning gas tanks for new purchases. Alternatively, gas-tank receipts could be used to claim rebates from a bank.

It seems strategies like this must be pondered rather than measures to prevent the continuing conversion of vehicles to household gas. Only an across-the-board price increase will put a brake on the erroneous use of cooking gas to drive auto engines.