Thailand Crisis

Thailand it’s… Wonderland everyday.

A country where a Prime Minister makes paper birds in Parliament, where the president of the national airline is fired on thursday morning and then called back in the evening… and where the Energy Minister changes his mind on a daily basis.

Wonderland indeed. And every sane people should feel like being Alice.

Anyway.

Since april, PTT has announced that LPG prices would go up in july. On june 20, the Energy Minister was speaking about it too. But then… the U-turn (famous style figure in the country).

The energy minister postponed a planned increase in the price of liquefied petroleum gas (LPG) for use in vehicles after a severe shortage in the market raised suspicions vendors were hoarding supplies.

Energy Minister Poonpirom Liptapanlop said yesterday the priority was to ensure supply for LPG meets demand.

The ministry previously announced it would raise the LPG price today and later gradually float it to alleviate the burden of a state price subsidy. The announcement led to a serious shortage of LPG for vehicles over the weekend.

The minister said a date would be set later for floating the price.

”As of now, the date for the LPG price rise is unconfirmed. The ministry has not yet considered it,” she said. (Bangkok Post)

Thailand’s supply of liquefied petroleum gas (LPG) is in shortage at present mainly because greater numbers of personal vehicles have been converted to use the alternative fuel, according to the Energy Ministry.

Officials conceded that LPG procurement had been squeezed because gas use in May had risen by 5,000 tonnes.(TNA)

Energy Minister Poonpirom Liptapanlop affirms there will be no adjustment to LPG prices in the immediate future. She says a joint integrated committee will be set up to study the effects of the price adjustment by next week.

A proposal will be made to revise up the price of LPG, which was widely-expected to take place this month. The joint committee will be responsible for evaluating the effects of the increase on the economy and consumers. It’s hoped a final report of the study will be completed in a few weeks. The report will then be submitted to the the National Energy Policy Committee for its consideration. (TOC)

So ladies and gentlemen… you’re lucky ! You just won a few days, maybe a few weeks. And without any doubt, this courageous decision is going to reduce the inflation problem we currently have…

Of course, until then, you’ll face chaos and hoarding and shortages… but don’t take it personally. The Energy Minister is working, hard, for you.

Just in case : be prepared for the next U-turn. Into the Rabbit-hole.

UPDATE 3 JULY
For once, the Democrat Party says something intelligent : “motorists, consumers, suppliers and vendors saw the disapperance of LPG from the markets because government leaders made conflicting remarks.

“The prime minister said the price of LPG will rise on July1, the finance minister said the price increase will happen later this month and the energy minister said there is no plans for price hike,” Jurin said.” (Nation)

Well put.

No rest. No rest on the energy front. PTT increased its prices yesterday.

Benzene 91 now sells at 41.79 baht, gasohol 95 at 38.19 baht, gasohol 91 at 37.39 baht, and diesel at 42.64 baht. However, PTT’s benzene 95 price remains at 42.09 baht while that of Shell is at 43.19 baht. (TOC)

And Shell increases by 40 satangs today, “bringing the retail prices to the new record highs“.
The octane-95 petrol will be Bt43.59 while diesel will be Bt43.44. (Shell is usually more expensive than PTT).

Here is an update of the chart…

Some interesting figures about LPG usage, published by Nation.

It’s easy to set the equation of the current problem :

-explosive growth of demand (look at chart of sales)
-huge difference between local and world prices, because of the subsidy
-local production doesn’t cover consumption anymore, so imports -at high prices- are necessary

The Energy Ministry showed that during the first five months of the year, 600,000 vehicles were fitted with LPG engines. This brought the total of LPG-fuelled vehicles to 1.2 million. Demand thus rose from 47,000 tonnes a month last year to 52,000-55,000 tonnes in March.

Total LPG demand thus rose to 360,000-380,000 tonnes a month, against a production capacity of 300,000-330,000tonnes. Exacerbating the situation was PTT Aromatics and Refining’s shutdown last month of its facility for annual maintenance, cutting supply by 10,000 tonnes a month. Also, imported LPG could not reach Bangkok stations last Saturday, due to docking problems for ships transporting it from Chon Buri.

Due to subsidies, local refineries are using LPG in their operations rather than selling it cheaply, at about US$300 (Bt10,000) per tonne against the world price of nearly $900 per tonne. Rising oil prices has also sparked higher demand for LPG from motorists.

It’s Economy 101. Even Psychology 101. But still too difficult to understand for the thai authorities.

Since a few months, we know that prices of LPG will increase in july. PTT was very clear. But not the government, as usual.

The subsidies cost too much (read here).

In order to avoid hoarding, they refused to gives details (how much, and when exactly).

It was a mistake. Because people can fantasize.

It would have been more efficient to say “LPG prices will increase on july 1, by %”. But such transparency would have created “inflation expectations”, right ? Exactly like with NGV (+41 % announced for end of december).

The government is so terrified that they try to postpone to the very last minute any prices hikes.

And since a few days… well… we have shortages (read testimonies of drivers in Bangkok, on ThaiVisa forum, and in Pattaya).

Because hoarding and probably because of mismanagement of imports.

The Energy Ministry warned dealers on Sunday against hoarding liquefied petroleum gas (LPG), as thousands of taxis had to stop running because of the hoarding.

Permanent Secretary for Energy Pornchai Rujiprapa said he was confident that there would be no LPG shortage in the country but he did not address hoarding for a suspected price rise on Wednesday.

Taxi drivers told passengers that gas stations had shut down on Saturday amidst reports that the price of LPG will be allowed to float as of Wednesday (July 1). They expected the cost to double from 11 baht to 22 baht per litre. (Bangkok Post)

Another disaster, perfect symbol of mismanagement and utter stupidity ! I mean it’s becoming laughable.

There is no point to warn dealers, after the war, with the little fists of the Energy Minister… And there is no point to deny the problem of shortage.

The only solution was to play transparency card, right from the beginning, with full disclosure of all the datas, in order to allow people to anticipate.

But Thailand continues on the Zimbabwe’s path. With a smile.

UPDATE 1
The Commerce Ministry also shows his little fists. Commerce Ministry permanent secretary Siripol Yodmuangcharoen Sunday said he received a report from the Internal Trade Department that some operators had been hoarding the LPG ahead of the price hike.

“Such hoarding is illegal,” Siripol said, “We will take harsh actions against the offenders”. (Nation)

UPDATE 2
The little game continues this morning : “Permanent Secretary for Energy Pornchai Rujiprapa on Monday affirmed that prices of liquefied petroleum gas (LPG) or cooking gas would not be raised by July 1 as many expected, but conceded they would be revised within a month.. (TNA).

Director-General of the Department of Internal Trade says the price of liquefied petroleum gas (LPG) will not decrease on July 1st as the Energy Policy Board has yet called a meeting to discuss the price hike. (PRD)

It’s crystal clear ! They need to organize… a meeting in order to set the date for the increase…

UPDATE 3
About one fifth of Bangkok’s taxis had to stay idle Monday after many service stations ran out of liquefied petroleum gas (LPG). “There’s nothing to fill these taxis’ tanks,” Siam Taxi Cooperative president Witoon Naewpanich said. (Nation)

Here is an update of my chart, with datas for april.

(Source EPPO, Table 2.1-4).

The drop in april (from 944 000 barrels per day to 830 000) was certainly caused by Songkran holiday. As for the value, EPPO says that the average price of imported crude oil in april was 105,35 USD per barrel (versus 99,11 in march).

As you know, we have to watch carefully the energy bill, because of the surge of oil prices… and the effects on the trade balance… therefore on the THB (currency). Everything is linked… Particularily when we speak about oil.

Anyway. I would like to add that the datas provided by EPPO and the Customs Department (compiled by the Bank Of Thailand) are different.

For instance in march, EPPO gives a total value of 2,9 billions USD for import of crude oil… While the Customs state 2,4 billions (roughly 13 % less) ! 9 months over 12, EPPO’s figures were higher than Customs.

And the exchange rates THB-USD are different too… ! And worse, even if you take in account the different exchange rates… you stil get different total in THB and USD… It prooves that the core of the problem is… volume.

I guess both have the same definition of a barrel of crude oil… I hope so… But for some reasons, the EPPO and Customs, both official departments, don’t have the same set of datas… Frustrating.

Here is a small chart about the value in USD of imports of crude oil (crude oil only), for both.

And it shows that one of the problem of the oil issue… is datas. I mean BP, EIA, IEA… prestigious and powerfull sources of infos… compile datas for production, consumption, imports, exports… for all the countries… provided by all the countries… after thoses datas are studied, charted, analyzed by everybody, peak oil believers and non-believers, government, professionals etc. …

My point : some data sets are not reliable. And worse : may vary from time to time.

Bottom line : when you read that “Global oil consumption grew by 1 mb/d in 2007” (source BP Statistical Review of World Energy 2008), you have to understand that there is a serious… fog around the math magic !

Okay, okay, what is important is the trend. Even if your data set is flawed, you can still make valid observations with variations.

But, if we start speaking about absolute numbers (like consumption was 1 million barrel per day higher in 2007 compare to 2006)… I mean… we need to be careful… nobody did actually and really count those barrels…

Sounds stupid to say but I can’t find any clearer way to say it.

The oil issue is just too burning, too essential, with too many geopolitics and economics links… it’s impossible to believe that all the datas are genuine and/or right.

There is always a fog around the datas whether it’s deliberate or not.

Truckers are demanding three million litres of subsidised diesel a day from the government to help them cope with the rising cost of fuel. Thongyu Khongkhan, secretary-general of the Land Transport Confederation of Thailand, said yesterday that the request for three million litres a day was based on 20,000 trucks that needed the government’s assistance nationwide.

According to Mr Thongyu, the 20,000 trucks include 2,600 vehicles operating in the Northeast, another 5,000 that serve the export and import sectors, and about 4,000 others running in the South.

The proposal was made to the Transport Ministry, which will have to forward it to the Energy Ministry, the expected procurer of the subsidised diesel. (Bangkok Post)

So per month : 90 million litres.

Last week, the Transport Ministry said :

However, Mr Piyaphan said not all truck operators would receive a subsidy of three baht per litre of diesel as earlier demanded by the federation. The Energy Ministry could allocate only 122 million litres of subsidised priced diesel per month for a period of six months.

The government has so far knocked three baht a litre off the price of diesel for fishery, farm and bus operators. This leaves only 40-50 million litres of cheap diesel per month for truckers.

40 to 50 millions litres available… Against 90 asked by unions. That leaves… a gap. And an opportunity for more conflicts and other negociations…

Furthermore, this scheme is likely to create anger amongst the trucks companies. Why some of them could enjoy a subsidy, and others don’t ? Who will set the criterias ?

It’s obvious that this scheme is going to explode into the hands of the government.

And eventually… what we will do in december ? Back to square one…

You might remember that diesel is subsidized since march for 0,90 THB per liter (the gvt reduced the tax per liter designed to pay back the Oil Fund, debt inherited from previous… gasoline subsidies, when Thaksin was Prime Minister)…

The subsidy was supposed to end in… july.

At that time, I wrote : “So, let’s see… What will happen in july ? Santa Claus will become Santa Closet (after a sex-change operation) ? Crude oil will go back to 70 USD per barrel, with the “driving season” kicking in the USA ? Yes, sure. The global recession will cut demand ?“

3 months later… I must confess : Santa Claus is Santa Closet indeed. But oil didn’t go back to 70. I was right. We are today… at 140 USD per barrel (and counting, this morning, intraday, new record at 141,60).

The diesel price subsidy programme for motorists, set to expire in July, is likely to be extended as the Energy Ministry is trying to deal with the record price.

Energy Minister Poonpirom Liptapanlop said she was considering whether the reduction of 90 satang per litre on the retail diesel price, funded by the state Oil Fund and the Energy Conservation Fund, should be extended or even increased.

”Worse still, the diesel price has reached a record high at above 42 baht a litre. We don’t think it is a good idea to let motorists struggle with diesel prices jumping right now,” she said yesterday. (Bangkok Post)

It’s not a surprise of course… And this -expensive- game is likely to continue.

The government is under severe, extreme pressure (censure debate, scandals etc.)… inflation explodes… they just can’t scrap the diesel subsidy. It’s just impossible.

However, we need to understand that it’s the worse policy possible… It will get us and them… absolutly nowhere (maybe… Zimbabwe).

Unless, you continue to believe in Santa Claus… and a barrel of oil at 50 USD in 6 months…

Interesting times…

[reminder : some corporations enjoy also a subsidy on diesel : bus companies, fishermens, trucking companies etc. read here]

We left the deal between the truckers and the government here… But actually it seems a little bit more complicated.

Energy minister and Chairman of the National Energy Policy Committee Poonpirom Liptapanlop revealed that Cabinet has agreed with the resolution to ease the impact of the oil price hike by providing a subsidy of three baht per litre of diesel for five more sectors, namely the Northeastern truck operators, the Land Transport Federation of Thailand, taxi operators under the government’s Ua-Arthon project, the prawn farmers group and the fishermen group.

The operators’ reports have to be presented for Cabinet deliberation shortly. However, the Energy Ministry confirmed that it will support the project with the allocation of 90 million liters of diesel per month for the next six months.

Land Transport Federation of Thailand’s Secretary-General Thongyoo Kongkhan stated that around 100,000 trucks were listed as eligible for the subsidized fuel and each needs about 150 liters of diesel per day, resulting in a demand of around one million liters of oil per day over six months. (TOC)

So we had the bus companies, now the fishermens (but it’s not really new)… the taxis from a special project (they just received a green light to increase fares)… the prawns farmers (okay)… and the Land transport Federation, along with the truckers from North-East…

Talk about a convoy !

So, exactly like I said… there isn’t enough cheap diesel for everybody… There are hundred of thousands of trucks in Thailand… So who is going to -really- benefit from the subsidy ? Like always, nothing is clear.

The government is walking on eggs with this fuel issue… Poor communication, no transparency… That’s a pitty.

The Joke Of The Day, gold-platinum medal with special citation from the jury, goes to Miss Rosana.

Ready ? (it’s going to be very fast)… :

Bangkok Senator Rosana Tositrakul said the government should buy PTT Plc back from investors so that the government could reduce retail oil prices to help the public members. (Nation)

It’s beautiful !

More nationalist, more populist, more demagogic and definitely more idiotic… I think it would be hard.

You were thinking that women are smarter than men ? Well you know now that, unfortunatly, it’s not always true.

[if you want to know more about Rosana, senator, who was member of the... PAD... who was protesting in Singapore against Temasek... visit BangkokPundit, he has a lot about her]

Truck operators called off their planned protest to bring convoys of trucks to Bangkok after the Transport Ministry gave in to their demand for subsidised diesel prices and low-interest loans to be made available to convert their engines to compressed natural gas. Transport Ministry representatives yesterday met truck operators to discuss an assistance package.

Deputy Transport permanent secretary Piyaphan Champasut, who chaired the meeting, said the ministry would seek cabinet approval to allocate cheap diesel and provide low-interest loans to hauliers as well as reduce taxes on new trucks powered by compressed natural gas (NGV).

The ministry wanted the Land Transport Federation of Thailand (LTFT), which represents the truck operators, to submit details of the amount of diesel its members wanted to use and the allocation of fuel among its members.

However, Mr Piyaphan said not all truck operators would receive a subsidy of three baht per litre of diesel as earlier demanded by the federation. The Energy Ministry could allocate only 122 million litres of subsidised priced diesel per month for a period of six months.

The government has so far knocked three baht a litre off the price of diesel for fishery, farm and bus operators. This leaves only 40-50 million litres of cheap diesel per month for truckers.

The ministry would urgently forward to the Finance Ministry the operators’ demands for cheap loans and the establishment of a 20-billion-baht fund to support the conversion of their truck engines to compressed natural gas and a tax reduction on new trucks with NGV engines. (Bangkok Post)

Well, it wasn’t too long… The government, in a very weak political position, had no other choice. After giving up to fishermen and bus companies (very quickly)… it was impossible to say no to the very powerfull truckers sector.

They are just too vital for the country’s economy.

And their power of coercition is too strong. Can you imagine a rallye… of trucks ? All the thai cities could be blocked.

However, the “deal” could end badly. When the truckers will understand that 40 to 50 millions litres per month… is not enough. Not all of them would be able to enjoy the subsidy… Tricky situation.

So to summarize : the government might have won a few months… and the truckers some relief. But after ?

Back to square one : the inflation tsunami.

The trap is closing on the government. Two weeks ago, they gave a subisidy of 3 THB per liter of diesel to the bus companies… So of course now, other “motor” corporations ask exactly the same.

Chavalit Pichalai, deputy director-general of the Ministry’s Energy Policy and Planning Office, said refineries are now selling 30 million litres per month to government-run buses and privately-owned buses which joined the government in offering services in metropolitan Bangkok. (TNA)

30 times 30 = 90 millions THB per month…

But the freight transports companies use a much bigger volume of diesel than the buses…

Meanwhile, in New-York, oil touched this morning a new intraday record at 139,89 USD per barrel…

Truck operators threatened on Monday to block highways into Bangkok unless the government agrees by Thursday to their demands for cheap loans to convert their engines to run on gas. Energy Minister Poonpirom Liptapanlop said she was considering a diesel subsidy to the truckers.

Demands from the truck operators were submitted to the government on Monday and are scheduled for discussion Thursday.

Mrs Poonpirom said she had assigned a ministry committee to consider selling diesel fuel at subsidised prices to truckers as local oil prices continue to increase.

The minister said transport owners had earlier urged the government to assist them by asking refineries to sell diesel three baht per litre cheaper than the retail market price. (Bangkok Post)