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EPPO wants refiners to cut profit margin in bid to control oil price

EPPO wants refiners to cut profit margin in bid to control oil price

FRIDAY, June 03, 2022

A refining profit of two baht per litre is appropriate, the Energy Policy and Planning Office (EPPO) said, as the rising price of crude oil puts pressure on the overall price.

EPPO director-general Wattanapong Kurovat said on Friday that the crude oil situation had led to a hike in refining cost as well. The recent refinery margin is THB5 per barrel in April and May.

Therefore, the EPPO will cooperate with related organisations, especially the Commerce Ministry, to find a solution. Moreover, it will talk with oil refineries about the cost and is expected to reach a conclusion this month.

He said some people have criticised the THB5 refinery margin as too high, but they should consider the true cost of buying crude oil. He said the refining cost is also increasing in the current situation.

He said the Energy Ministry must be fair to every sector. Oil price will decrease if the refinery margin decreases.

Wattanapong explained that a profit of THB2-3 per litre is suitable as refineries do not have a role in lowering the ex-refinery price because the figure from the Energy Ministry is the estimated number, not the actual number.

Wattanapong said that he did not expect crude oil price to increase as much as in the past for the rest of 2022. He expected it to stay at around $110 per barrel because European countries have adapted to use more of other energy sources.

Meanwhile, he expected the US to release shale gas into the market at an attractive price even if there is a carbon problem, as a necessary situation.

He forecast that energy usage will grow by 2.1 per cent in 2022 if Thailand’s gross domestic product grows by 2.5 to 3.5 per cent, the baht stays at 33.3 to 34.3 to the dollar, the Dubai crude oil price is $105-110 per barrel, and the world GDP grows by 3.5 per cent.

Meanwhile, primary energy consumption is expected to increase in almost every category. Oil consumption is expected to increase by 12.9 per cent, coal/lignite by 6.8 per cent, and hydroelectric/imported electric consumption by 8.2 per cent.

In contrast, natural gas usage is expected to decrease by 9.5 per cent as the price goes up due to the Ukraine-Russia conflict. Users will have to use diesel fuel and stove oil instead.

Wattanapong said that energy usage in the country is increasing due to the economic recovery and the country’s post-Covid opening. However, the Covid-19 situation and the prolonged Ukraine-Russia conflict might affect power usage so they should be monitored.