Bangkok Post (Thailand): Firms urged to prepare for worst oil scenario: “…Asada Harinsuit, general manager for fuel market development of Shell in Thailand, noted that excess oil production capacity worldwide was only 1.5 million barrels per day, a fact that would keep prices under pressure through the first quarter of 2005.” (ShellNews.net) 11 Nov 04

Nov 11, 2004

Local businesses should steel themselves for the prospect of oil prices reaching US$60 per barrel in 2005, according to local experts.

Such an increase would have profound implications on transport and energy costs as well as how businesses manage their risks, according to speakers at a seminar organised by Siam Cement Plc yesterday.

Oil prices currently are trading at around $47 in New York and $43.50 in London, down from highs of $55 in New York last month.

But Asada Harinsuit, general manager for fuel market development of Shell in Thailand, noted that excess oil production capacity worldwide was only 1.5 million barrels per day, a fact that would keep prices under pressure through the first quarter of 2005.

Demand, meanwhile, is expected to rise to 84.7 million barrels per day, up from 83 million this year.

Mr Asada said that with authorities expected to ease off on subsidies for diesel next year, local businesses needed to prepare for the impact of rising energy costs.

Companies reliant on oil products needed to consider hedging strategies to help manage expenses, he said.

Bhanumas Srisukh, managing director of Cementhai Logistics, a subsidiary of Siam Cement, said fuel accounted for 40% of his company's total direct transport costs. "Other costs include drivers, maintenance, and depreciation."

Efficiency gains and cost savings could be realised by better planning of shipments to minimise empty trips and moving some freight to water-based transport, he said.