BANGKOK -- Southeast Asian oil companies are under government pressure to keep prices low to offset the economic impact of surging Brent crude levels which hit their highest since 2014 last week.
Regional economies are feeling the pain of surging oil prices after Brent crude reached $86.74 a barrel last week, prompting governments to demand state-controlled companies keep a lid on prices, even though this has an adverse impact on their earnings.
The latest move was seen in Thailand, the second biggest economy in the Association of Southeast Asian Nations, where Deputy Prime Minister Somkid Jatusripitak held an urgent meeting with the CEO of state-owned PTT on Thursday to ask the company to keep the retail price of oil at current levels.
Somkid asked PTT to find a way to keep domestic oil prices sold to motorcycle taxi drivers at 3 baht, or $0.09, per liter lower than market price to help maintain the cost of living for low-income earners.
"As the nation's oil company PTT should play this role to help support the poor, particularly at a time that oil prices are in the rising trend. Helping the poor is good and PTT should do it," Somkid told reporters after the three-hour meeting with PTT CEO Chansin Treenuchagron and other PTT executives.
However, Energy Minister Siri Jirapongphan who also joined the meeting said PTT would study the market. "The study should end very soon and we expect the measure to be implemented within three months from now on, or before the end of this year, when oil price normally rises higher on rising demand in the winter season," Siri said.
Although PTT declined to comment on the meeting, the company, which is majority-owned by the Thai government, normally toes the line.
Over the last decade, the company had registered profit falls of up to 100 billion baht, or $3 billion, to meet government demands to subsidize the price of liquefied petroleum gas.
Critics and analysts said the latest government move is a bid to win voters ahead of the general election due in the first half of next year.
"It would have only short-term psychological impact on PTT share prices since it is not a big burden on PTT earnings. The number of motorcycle drivers registered to the government is quite small and the motorcycle oil tanks are also small. It would make only 1% of PTT total oil sale," said an analyst at Philip Securities.
According to the Ministry of Transport, the number of motorcycles registered stood at 300,000 units, half of which are in Bangkok. PTT shares fell 5.09% to 51.25 baht on Thursday, tracking Asia-wide falls.
PTT is not the only energy company to face government pressure. In Indonesia, ASEAN's biggest economy, the latest surge in oil prices has prompted an embarrassing policy flip-flop.
On Wednesday morning, the country's state oil and gas conglomerate Pertamina said it would increase prices of its non-subsidized fuels, but will keep current prices for subsidized gasoline and diesel that is mostly used in public minivans and by low-income households and industries.
But just hours later, Energy Minister Ignasius Jonan said the government would raise the price of subsidized gasoline by approximately 7% to 7,000 rupiah ($0.46) per liter on the day.
About an hour after that, the energy ministry retracted Jonan's statement, saying there would be no hikes for subsidized fuel for now. Fuel price hikes is a highly sensitive issue in Indonesia, especially ahead of presidential elections in April in which President Joko Widodo is seeking re-election.
Bank Indonesia Senior Deputy Governor Mirza Adityswara said Thursday that the impact of fuel price hikes on inflation should be contained, but Indonesia's trade deficit would widen.
"We have to deal with this [rising oil prices], but the timing is up to the government," Adityswara said.
In Malaysia, Prime Minister Mahathir Mohamad reintroduced fuel subsidies in May, fulfilling the ruling party's election promise to stem the rising cost of living. The government has allocated 3 billion ringgit ($723 million) in subsidies for 2018, abolishing the weekly price-float mechanism implemented by the previous administration.
Rating agencies said that allowing the market to decide fuel prices would help Malaysia to keep its fiscal deficit at bay. And state oil company Petronas has declared a dividend payout of 24 billion ringgit to the government for 2018, five billion ringgit more than originally planned. But lower-income voters blamed the previous government for not helping them with their costs of living.
In the Philippines, high inflation for nearly a decade has become a major political issue. The government has reiterated that, under a law introduced this year, further hikes in excise tax on fuel will be suspended once crude prices hit $80 per barrel, three months before a scheduled increase.
In August, Manila's energy department directed oil retailers to sell dirtier but cheaper fuel to ease inflationary pressures. The move, however, was opposed by the transportation and health departments as well as some legislators, prompting the energy department to review the order.
CK Tan, Erwida Maulia and Cliff Venzon contributed to this story.