After more than three decades of government manipulation, liquefied petroleum gas (LPG) trading has been completely liberalised as of today, say industry officials and experts.
From now on, LPG retail prices are predicted to move in line with global oil prices, albeit with the six-month lag typically seen.
The LPG Traders Association (LTA) expects competition among LPG traders in the transport sector to intensify.
LTA chairman Chisanupong Rungrojngamcharoen said petrol retailers have been in a price war since oil prices collapsed in late 2014, forcing fuel retailers to resort to marketing campaigns to attract buyers, including distributing gifts and offering premiums such as free drinking water.
The liberalisation of LPG is likely to put more pressure on retail petrol and make gas retailers lower retail prices even further to maintain competitiveness against relatively low petrol prices.
Mr Chisanupong said some LPG retail gas operators have cut retail prices to 12 baht per litre, below the 12.50-baht monthly reference price announced by the government.
The reduction is part of a campaign to attract motorists to continue to use gas after many returned to petrol, as prices have shrunk more than 50% in line with falling global oil prices.
LPG became popular for motoring and cooking after the discovery of natural gas in the Gulf of Thailand, after which LPG produced at PTT Plc's gas separation plant was first distributed to consumers.
But the gas eventually become a political tool, with prices constantly fixed and manipulated by governments that pegged prices at lower-than-market rates to retain political popularity for more than 30 years.
Past governments attempted to deregulate the system in order to cut burdensome subsidies from fiscal budgets in 1992, 1998 and 2007, but all efforts failed.
In late 2014, when global oil prices fell and dragged gas prices down, the government was encouraged to initiate a plan to gradually float gas prices until a complete float was achieved. The deregulation includes LPG imports for re-export, breaking up PTT Plc's monopoly.
The liberalisation is expected to help cut losses incurred from the 205 billion baht in LPG subsidies during 2008-14. In 2012 alone, the subsidies cost the government 50.5 billion baht.
But Mr Chisanupong said cooking gas competition in the household sector is unlikely to intensify, as massive investment is necessary enter the market. The likelier scenario is that there will be few major players in the household sector for at least the next few years.
He said companies that expect to jump into the market will need huge capital spending for such items as cylinders and gas logistics facilities.
"New LPG traders must have their own LPG refill facilities to receive gas, which is normally carried via marine transport, before filling cylinders to be distributed under their own brand," Mr Chisanupong said.
The Energy Ministry's Energy Business Department will develop a central cylinder repair unit to absorb some costs and help new entrants into the market.
Director-general Witoon Kulcharoenwirat said the department is conducting a feasibility study on the project before making any decisions.
SET-listed Siam Gas Petrochemicals Plc (SGP), the country's second-largest LPG trader, said the company's logistics system is prepared for expansion not only domestically, but also throughout Asean, after prices are deregulated.
SGP managing director Jintana Kingkaew said sales volume this year and next year is expected to grow by 5% and 5.2% to 3.05 million and 3.1 million tonnes, respectively.
She attributed the forecast to rapid growth of the re-export business serving China and other Asian countries.
SGP plans to allocate capital expenditure to upgrade its LPG storage and business expansion over the next five years (2017-21).
In contrast, the liberalisation of LPG has also triggered fears among small consumers, particularly small street food vendors, that high cooking prices could hurt them eventually.
Pannathad Thiensuwan, a street food vendor in Pathum Thani's Lam Luk Ka district, said he fears that rising prices will push costs higher and adversely affect his business, since gas prices make up a major portion of his costs.
The government does not allow street vendors to raise their costs, giving them smaller profit margins.
"If I raise my prices to more than 40 baht a dish, there will hardly be any sales because consumers will not accept expensive food prices," he said.
The country's biggest LPG trader, PTT Plc, expects to talk with energy policymakers about rates for LPG storage facilities, which are expected to open for other gas traders to rent.
PTT built up its LPG storage in Chon Buri province to increase storage capacity when LPG was in high demand, but the price collapse and demand decline left the facilities unused, forcing the company to seek tenants for storage.