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Excise tax and contribution to Oil Fund lowered
What’s new. The Energy Policy Committee (EPC) made its first move to restructure
domestic retail oil price by reducing the gasoline excise tax and contribution to the Oil
Fund. This will lower the retail oil price of gasoline (except for Gasohol E85) by Bt1-
3.89/liter. The retail price for diesel remains below Bt30/liter despite an increase in the
excise tax to Bt0.75/liter from Bt0.005/liter. This will be offset by the reduction in
contribution to the Oil Fund. According to the EPC, the Oil Fund will lose contributions
of Bt1.1bn/month, cutting its cash flow to Bt2.5/month. We note that the latest net
negative position of the Oil Fund was Bt8.4bn as of Aug 10, Bt361mn less than the loss
a week earlier.
Comment: This move to restructure oil prices will not affect any listed company since
all the changes were made by changing taxes and Oil Fund contribution, key elements
in the distortion of the retail oil price, and leaving product prices untouched. This also
signals the EPC’s intention to revise the price structure to achieve the real objectives of
the tax and the Oil Fund. This means retail oil prices are more likely to reflect global oil
price movements; this includes diesel price, which will rise to above Bt30/liter at some
point.
The Oil Fund will feel the effect most strongly, as it will lose cash of Bt1.1bn/month. At
the same time, the most recent fall in negative position of the Oil Fund suggests that
the slashed contribution from retail oil consumption will be offset by contribution
from the LPG market after LPG price was raised in 1H14, though price was then frozen
after the NCPO took the helm.
At this point in time, LPG price is untouched. This is understandable since the public is
far more vulnerable to changes in LPG price. The EPC will need to take more time to
weigh the impact on the general public and the better utilization of economic
resources that would result if this resource is directed to the petrochemical industry.
We believe the EPC will find a way to balance the needs of both sides.
