ทุบซ้ำราคา ‘หน้าโรงกลั่น’ สะเทือนธุรกิจ-หุ้น แค่ไหน? | THE STANDARD WEALTH

The energy minister has announced a price drop at refineries, initially from 2 baht to 5 baht, with a further reduction of 3 baht. This situation has led to an analysis of its potential impacts on the fundamental factors of the refinery business. The price adjustments are phased, with an initial 2-baht reduction, followed by an additional 3 baht, totaling 5 baht, effective from April to May 9th, before settling at a 3-baht drop. To understand the implications, it's essential to clarify the term GRM, or Gross Refining Margin, which represents the profit, cost, and refining margin. Another related term is "Crack Spread," essentially the difference between the price of crude oil and the price of refined oil, encompassing all associated costs like electricity. The war that began in March significantly impacted the refinery business. Refineries, having secured crude oil purchases 1-2 months in advance, received crude oil at a relatively cheap price during the war. However, the price of refined oil subsequently rose due to increased demand for products like diesel and gasoline, driven by the conflict. This disparity, where crude oil was cheaper than refined products, led to a high refining margin in March. However, this margin has been steadily declining. From a peak of $36, it has fallen to around $10, with expectations of further decreases in the second quarter. This is because security measures and crude oil storage capacities vary among refineries. While some could store cheaper crude for a couple of months, they will eventually face higher costs as crude oil prices now exceed $100. This suggests that the GRM should have decreased, and the government's price deductions further amplify the pressure on refinery profits. The pressure on Thai refineries stems from the high crude oil prices, a direct consequence of the unavoidable war. While refineries initially benefited from securing cheaper crude, the current high gasoline prices mean they now have to purchase crude at elevated costs. The government's intervention to lower prices implies that it will eventually have to compensate refineries for their losses, though the timing and specifics remain uncertain, posing a risk to the industry. Despite potential ceasefire negotiations, the damage from the Middle East conflict has been done, leading to the possibility of the "Crack Spread" remaining high. If prices drop due to government intervention, it could lead to further cuts, a risk that factories must confront. From a business perspective, government intervention in pricing, while aimed at helping the public, can deter foreign investment. The economic impact of such policies is significant. Unlike previous crises, such as the gas scarcity in 2022, where the oil fund and EAT bore the burden, the current approach differs, potentially affecting investment attraction in various sectors. While some sectors like data centers and electronics might still attract BOI investment, the energy sector could face increased scrutiny. Foreign investors view the policy of lowering prices with concern, questioning its impact on refinery confidence. While opinions vary, some argue that refineries should simply pay taxes, but this often circles back to government revenue collection. The government faces the challenge of balancing public welfare with business interests, and it's understood that it cannot please everyone. From an institutional client's perspective, while high oil prices make life difficult for the public and the economy, government intervention to lower prices is seen as a necessary measure to combat inflation and support the purchasing power of the middle-to-lower-middle class. Without such policies, the economy, already facing challenges, would likely experience further stagnation due to uncontrolled oil prices and rising inflation. Regarding SPRC, a refinery with Chevron as a major shareholder, there are two primary concerns regarding government intervention. First, it could be seen as a violation of business principles, potentially leading to lawsuits, similar to past issues concerning mining premiums. Second, it could trigger a tax crisis, especially with ongoing negotiations between the Ministry of Defence and the US under Section 301. While a lawsuit is a clear possibility given the direct impact on profits without clear compensation mechanisms, the tax negotiation issue is viewed differently. It is believed that the tax negotiations with foreign companies like Chevron are separate and will not be affected by the current energy pricing dispute. However, the energy sector's future investment will undoubtedly be monitored more closely due to these interventions. CGS International Securities believes that the GRM refinery group has likely moved beyond an acceptable investment point. While the war initially increased demand for diesel and other fuels, leading to high profits due to stable crude oil costs, the government's intervention policy makes trading refined stocks more challenging. For those already invested in refinery stocks like SPRC or Bangchak, the current volatility and uncertainty surrounding further price reductions suggest that it might be a good time to sell and take profits. For those not yet invested, it's advisable to consider other investment opportunities in the energy sector, such as oil mutual funds or PTT Exploration and Production, which are considered more economical and less volatile as hedging assets. In conclusion, the government's intervention to lower fuel prices, while aimed at public relief, presents significant challenges and uncertainties for the Thai refinery sector. It raises questions about future investment, potential lawsuits from foreign shareholders, and the overall confidence of businesses operating in Thailand. The long-term impacts on the energy sector and the broader economy will require careful monitoring.