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Energy populism is too costly for us to swallow

Jun 29. 2014
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By Pichaya Changsorn
The Nation

Besides the messy Thai politics, energy is one particular area that has been subjected to a public backlash on a massive scale during the past few years.
Much of the information spreading over the Internet (websites, Facebook posts, Line chats and so on) are half-truths, and some are completely absurd, such as the premise that Thailand is as rich as Saudi Arabia in terms of oil reserves. But people, including some who are educated, are seemingly ready to believe much of this propaganda. 
The public are deeply discontent and distrustful of politicians, bureaucrats and the media. They like to hear what they like to hear. They want to believe what they would like to believe. It has also been mingled with politics, to be specific, the so-called Thaksin Shinawatra regime. Energy was among the top subjects that demonstrators fiercely raised during their months-long rally in Bangkok against the previous elected administration run by Thaksin’s sister Yingluck Shinawatra.
So it is no wonder the National Council for Peace and Order (NCPO) has put energy reform at the top of its agenda. The military junta has vowed to finalise a reform package for the energy sector by the end of this month. To that end, the junta has called for meetings with groups who have widely differing opinions on the issue of energy reform.
The public has some grounds for its discontent. Domestic prices of electricity, cooking gas, and petrol have all gone up by more than 20 per cent since 2011 (see the “Thailand’s soaring energy prices” graphic). 
Electricity tariffs have been increased by 23.7 per cent, from Bt3.16 per kilowatt-hour in 2011 to Bt3.48 in 2012, Bt3.78 last year, and Bt3.91 at present. Prices of octane 91 petrol with 10 per cent ethanol (E10), for example, have gone up by 20.2 per cent, from Bt31.84 at the beginning of 2011, to Bt32.74 in January 2012, Bt35.38 at the start of last year, and Bt38.28 at present. 
Through a few rounds of adjustments beginning last September, prices of liquefied petroleum gas for cooking have been raised by nearly 25 per cent to Bt22.63 per kilogram.
The cooking-gas prices were increased to reduce the huge subsidy burden carried by the Oil Fund, while the policy to fix the diesel price at Bt30 a litre has kept petrol prices unreasonably high. E85 petrol has also received a huge Oil Fund subsidy, at Bt11.60 a litre. 
A major cause of the rising price of electricity is the cost of natural gas, for which the wellhead prices in the Gulf of Thailand have gone up by more than 50 per cent over the past six years.
But these Oil Fund cross-subsidies and undisclosed formulas for natural-gas prices are not obvious to the public, who have seen their end prices only go one way: up. 
They have also read many reports, some true and others untrue, about the hefty bonuses and benefits PTT has paid its board members and management, and its nearly Bt100-billion annual profits (which were in fact meagre when compared with its own sale figures and those of its industry peers). 
Moreover, the public takes note that in contrast to the local price rises, the world oil prices have been relatively stable during the past few years. 
In nominal terms, crude-oil prices averaged US$87.04 a barrel in 2011, $86.46 in 2012, and $91.17 last year. Last Friday, West Texas Intermediate crude was trading in New York at about $105 a barrel, affected by the unrest in Iraq.
However, all of the above problems and misperceptions reflect an inconvenient truth: The more government meddles with energy-price policies, the more they get into trouble. 
Politicians have found energy prices among the easiest ways to win voters’ favour, but for Thailand, energy populism is too costly for us to swallow. As a country that is importing all types of energy – 81 per cent of its oil consumption, 70 per cent of domestic coal usage, and 20 per cent of natural gas – subsidising energy to achieve low prices is a sure path to disaster. 
Instead of stepping into the shoes of politicians, the NCPO should take this opportunity to reform the energy sector for a sustainable future. 
Instead of fixing short-term symptoms, it should focus its efforts on doing good things that are normally difficult to implement by populist politicians. 
Overhauling the energy industry’s regulatory bodies should be among the junta’s first priorities, as well as finding effective laws and mechanisms to prevent or minimise political interventions in energy policy and agencies. 
With dwindling domestic gas reserves that are estimated to last only seven years, and rising imports of liquefied natural gas whose prices are double those of domestic gas, Thailand is already in an energy crisis. 
And populist energy policy can only make things worse.

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