Energy Price Restructuring for LPG and NGV in Transportation Sector (Current Issue No. 2547 Full Ed.)

We at KResearch are of the view that the National Energy Policy Committee's resolution to raise the LPG price in the transportation sector by THB0.62/kg to THB22/kg., and NGV price by THB1.00/kg. to THB11.50/kg. (except for public transport bus use, which is being capped at THB8.50/kg), effective October 1, 2014 – as expected by the market – to reflect their real costs will increase expenses on LPG and NGV-fueled car owners by about 3-10 percent. We are also of the view that cost transfers to public/general transportation costs and consumer product prices will ensue at a moderate pace, though costs in other sectors should not increase much since those businesses are cooperating with the Ministry of Commerce on price controls. Given this, we expect that the new LPG and NGV price hikes will steepen Headline Inflation by only about 0.01 percent.

Undoubtedly, such increases will incur extra expenses on LPG and NGV-fueled car owners, but since these hikes are quite small compared to other fuels, and the average daily distance traveled by such vehicles is relatively short, these increases should not force them to switch to other fuels. However, public vehicles operating in areas not specified by the government and having longer daily travel distances may see significantly higher expenses incurred.