Petroleum firms dismiss Korn’s claim of 10 times increase in refining margin

The club, which is part of the Federation of Thai Industries, issued a statement that Korn was simply presenting a select part of the information to cause public misunderstanding. It clarified that refining margin had risen by just 0.47 baht per litre, and not by 10 times as claimed by Korn.

Korn had earlier called on the government to ask refineries to reduce their “high refining margin” to bring down oil prices. He proposed that the government slap a “windfall tax” on the refineries as they were enjoying an up to 8.56 baht margin per litre after global oil prices rose. Korn said the refining cost should not change, so the claim of refining cost was an “imaginative cost.

Korn pointed out that gross refining margin rose from 0.87-0.88 baht per litre in June 2019 and in 2020 to 8.56 baht in June this year, up 10 times.

But the Petroleum Refining Industry Club said the figures cited by Korn were not the market gross refining margin and Korn’s figures have not taken into account several other costs.

The club said that Korn had selected figures from the period of Covid-19 restrictions when oil consumption was very low, and compared them with figures when oil prices have soared.

The club clarified that refining margin in the first quarter of this year rose just by 0.47 baht per litre compared to the period before the Covid-19 pandemic.

The club explained that the refining margin was affected by several factors, including crude oil’s premium value — the difference between the crude oil price and the reference price of refined oil — transportation costs, the cost of fuel used in refining, the ever-changing labour cost and the investment cost in machinery to improve refining quality.

The club also pointed out that refineries could not set the refining margin on their own as the margin was calculated from the average value of all types of refined oil that is sold in proportion to the refining production. The average price will be deducted from the price paid for crude oil, which includes premium value, transportation cost and insurance cost.

The club added that the cost of fuel used and cost of loss during the refining process should be also be taken into account in determining the margin. The refining margin would fluctuate depending on global oil prices and demand and supply as well as the reserves of oil, the club added.