PTT, oil : “Do you want us to be a non-profit organisation ?”

It’s time Thai society and the state decided whether they need more subsidies or to cut consumption by using more alternative fuels. If you want us to be the organisation for subsidies, issue a new law to change our status to a non-profit organisation and delist us from the Stock Exchange of Thailand.

This is a very strong and bold statement from the president of PTT. And it comes after many other complaints (here, there and here).

And indeed, the situation is surreal (like in many other asian countries). The state owns the majority of the oil company… and organizes subsidy of the market through PTT, officially and unofficially.

The result ? A disaster a far as costs are concerned. And totally distorted markets. The economic agents can’t make any rational choice in such environment. They rush to LPG for instance, thinking it’s a good deal, on the long term… but LPG is heavily subsidized but It will have to increase, etc.

PTT Plc, the majority state-owned oil and gas company, expects the government’s oil and gas subsidy policies to cost it 63 billion baht this year, according to chief executive and president Prasert Bunsumpun. The liquefied petroleum gas (LPG) price-support scheme alone is projected to cost the company around 50 billion baht, as it needs to import the fuel at a price of US$950 a tonne but has to sell it for the equivalent of $330. […]

”Government subsidies are an effective tool to help consumers but only for a short term,” he said. He added that it remained a question where the massive amount of money needed would come from.

”PTT can shoulder these costs but only as long as we can. Look at national oil firms in other countries like China, India, even Malaysia. They can’t stand huge losses from so many years of subsidies,” he said, responding to calls by activists and senators for more subsidies. (Bangkok Post)

The game is easy when prices are volatile (go up and then go down). Unfortunatly, the black swan breaks this logic. Prices are increasing. Non stop (new record thursday at 145 USD per barrel ! ).

Beyond the political games, the short term ideas, there is one golden rule : eventually, someone has to pay the cost of the subsidy.

No escape : there isn’t any free lunch.

Thai people will pay. One way or another.

By the way… do you own shares of PTT ? 😉

3 Responses to “PTT, oil : “Do you want us to be a non-profit organisation ?””

  1. 1 fall 6 July 2008 at 8:17 am

    Is not it heart-warming to know that the government are using tax money (from rural and urban) to pay oil subsidy for rich urbanite so they can drive their car a bit cheaper?

    And everyone in the country, especially the poor, have to pay high for food (higher cooking gas price; LPG) so urbanite middle class can drive cheaper? Especially when they have one house (one parking lot), but maintain 3 cars…

  2. 2 MSB 7 July 2008 at 6:42 am

    lol… PTT are well kown for making up alledged “losses” they suffer due to government intervention. Its a well oiled PR machine to prevent people focusing on just how much money they are actually making… PTT will make well over Bt100bn this year.

  3. 3 ThaiCrisis 12 July 2008 at 10:02 pm

    Sure… it’s a big game. A game of cheaters.

    The gvt is cheating. PTT is cheating… I mean, fair enough.

    But at the end of the day… If I were a shareholder I wouldn’t be happy… 😉

    You can’t deny that subsidies (LPG, NGV, diesel plus the “invisible” subsidies on gasoline) have a cost for PTT.

    We can argue over the exact amount… But anyway, it’s a fact.

    By the way, we have exactly the same discussion in western countries about the “obscene” profits of oil companies. But without the subsidies costs. 😉

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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.

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