The current sugar quota system and 70:30 revenue-sharing scheme were designed to share benefits between sugarcane planters and millers and have no relation to molasses, he says.

Much more important is the global ethanol price, which is dictated by Brazil, the world's largest sugarcane planter and the pioneer in developing ethanol-based vehicle fuel on a large scale. Ethanol trading prices quoted in Brazil are the global benchmark.

The main influence on ethanol price movements is sugarcane output, since more cane crushing makes more molasses available.

Ethanol demand, meanwhile, depends largely on petrol demand as ethanol is blended with petrol to make gasohol.

A handful of ethanol producers in Thailand use cassava instead of molasses, and potentially have an advantage during times when sugar is expensive. However, both cassava and molasses are factored into the local ex-refinery prices for ethanol, which are calculated monthly.

"The country's formula involves finding a mean rate calculated between the three-month average price of molasses and the one-month average for cassava. The formula is fair and reflects the actual price since molasses are more popular than cassava among ethanol producers here," Mr Sirivuthi explains.

Regardless of the raw material used, ethanol prices are on the rise - at 23 baht a litre compared with 21 baht a year earlier - because drought has reduced both sugarcane and cassava output. For the next harvest season, output of both crops is forecast to decline by 15-20%.

Molasses prices currently are around 5.50 baht a kilogramme compared with three baht a year ago, while cassava is quoted at six baht per kilogramme, up from 4.50.

Bangchak Petroleum pioneered E10 gasohol containing 10% ethanol in 2001 and its use has grown steadily. Now E20 is poised to become the new standard, as most cars manufactured in the past two years can use the 20% ethanol blend.

As a result, the Energy Ministry forecasts ethanol demand will reach 3 million litres a day next year, compared with an average of 1.3 million this year.

Mr Sirivuthi says ethanol stocks in Thailand now total about 90 million litres, with 50 million in ethanol producers' inventories and 40 million in oil traders' tanks. This volume will be able to serve domestic demand until the end of third quarter.