PTT subsidies, low LPG prices,
and the rush towards LPG vehicle conversion
in Thailand
By Jon Fernquest |
The use of LPG [Liquefied Petroleum Gas] as a gasoline substitute for cars and trucks is rapidly gaining popularity in Thailand.
Next year, imports are expected to rise to five times current levels, from 200,000 to 1,000,000 tonnes of LPG fuel.
LPG is actually very expensive. At US$902 per tonne (in June) the retail price of LPG in Thailand would be 48 baht per kilogramme, much higher than the price at Thai gas stations.
Why, then, is LPG such a popular fuel for cars and trucks in Thailand?
Owners of cars and trucks only pay about a third of the full price.
PTT pays most of the price in the form of a subsidy. PTT can afford to do this favour of subsidising LPG for the government because the company is making money in other areas. PTT is also largely owned by the government. (See recent articles on PTT subsidies: article #1, article #2, and LPG price controls)
If Thai consumers paid the full market price of LPG, determined internationally, LPG would be a lot less popular.
The artificially low LPG price has led more motorists modifying their engines to use the gas.
LPG is more popular than the even cheaper Compressed Natural Gas (CNG) because LPG conversion kits for for cars and automobiles are three to four times more expensive. (CNG 8.5 per litre vs. LPG 18.13 baht per litre, CNG used in Natural Gas Vehicles (NGV)).
Will the artificially low prices for LPG create problems in the long-term?
In related news today, the government just narrowly averted a strike by truckers by promising to support the conversion of truck engines to CNG with a 20 billion baht fund and to reduce taxes on these vehicles.
The government also promised cheap diesel fuel for truckers as it has already promised fishery, farm and bus operators, reducing the price by three baht per litre. This may not go very far, because only 40-50 million litres per month of the cheap diesel are left over to be rationed to the truckers.
(Source: Bangkok Post, business, page B2, temp-link)
(Source: Bangkok Post, general news, page 4, temp-link)
Vocabulary:
LPG [Liquefied Petroleum Gas] - a gasoline substitute, less common worldwide than CNG below, but more popular in Thailand because of cheaper vehicle conversion costs (See Wikipedia)
a gasoline substitute - some fuel that can be used instead of gasoline, a gasoline replacement
a subsidy - money paid by the government to help pay for some activity it wishes to encourage
artificial - situation created by humans, not natural
artificially low - low not because of market forces, but because the government pays for part of it (subsidises)
Compressed Natural Gas (CNG) - a substitute for gasoline, diesel, or propane fuel, more environmentally clean alternative and safer in the event of a fuel spill, natural gas is lighter than air, so it disperses quickly when leaked or spilled, used especially by taxis, buses, and trucks (See Wikipedia)
Natural Gas Vehicles (NGV) - a car that uses either compressed natural gas, or less commonly liquified natural gas, vehicles are popular in Argentina, Brazil, Iran, Pakistan, Italy, Germany, Malaysia, and Thailand, especially popular in taxis to cut fuel costs (See Wikipedia)
a kit - a set of parts put together to make something
a conversion kit - a set of parts added to a car to change from gasoline to LPG operation
a strike - a work stoppage caused by the mass refusal by employees to perform work (See Wikipedia)
avert - avoid, prevent something unpleasant from happening
just narrowly avert - avoided, but almost didn't avoid
just narrowly averted a strike - avoid a strike, but almost didn't
truckers - people whose job is to drive trucks
fishery - a fish farm
X will not go very far - not a lot of X, so X will run out quickly
left over - remaining, the unused amount for other people to use
rationed - when everyone is given only a limited share of some scarce thing (water ration, food ration) (See Wikipedia)
