Thailand clears refiners over margin surge, says prices remain market-driven
The Department of Energy Business says the recent rise in refinery margins is a normal market mechanism after talks with refiners, adding that it does not directly affect pump prices.
Sarawut Kaewtathip, director-general of the Department of Energy Business, said on Friday (March 13) that the Joint Management and Monitoring Centre for the Situation in the Middle East had held talks with domestic oil refiners to address concerns over oil price volatility and refinery margins.
He said an initial review by the Ministry of Energy had confirmed that there was nothing unusual about the recent increase in refinery margins.
The rise was not determined by refiners or the government, but was the result of international market mechanisms based on the spread between two main components: refined oil prices, such as petrol, diesel and LPG, which are linked to regional market prices or Mean of Platts Singapore (MOPS), minus crude oil costs, which are set in line with forward trading mechanisms.
Sarawut further explained that the refinery margin reported by the Energy Policy and Planning Office (EPPO) reflected actual market conditions, which can be both positive and negative.
“Refinery margin does not always reflect a refinery’s actual profit, because if a refinery is inefficient, it may still suffer losses even when refinery margins are high,” Sarawut said.
He added that if crude oil is purchased at a high price, but global refined oil prices fall by the time the refining process is completed, refiners must also bear the risk of losses.
Asked how high refinery margins would affect the public, Sarawut stressed that refinery margin is only an indicator showing the daily spread between crude oil prices and refined oil prices. It does not directly affect the price consumers pay at the pump.
Retail prices at service stations are based on ex-refinery prices, which are the prices of refined products plus taxes and various levies under the free-market mechanism. In some periods, such as during war, refined oil prices may surge sharply because of market panic even if crude oil costs have not yet risen.
As for possible oil price increases next week, the government has assigned the Ministry of Energy, together with the National Economic and Social Development Council (NESDC), to closely monitor the situation and draw up scenarios to identify ways to help the public before submitting them to the joint centre for further consideration.
The director-general of the Department of Energy Business also spoke about progress on oil imports from Russia. He said that, following instructions for the Ministry of Energy to explore the option, the study had found that, technically, refineries in Thailand were capable of handling Russian crude oil.
The next step will be coordination with refiners and traders to consider procurement details. Initially, this will mainly be based on Brent crude prices, with the aim of providing another option for managing the country’s energy costs and securing alternative oil supplies from sources other than the Middle East, where transport is currently facing constraints.
