Thailand shifts gears to keep diesel costs cruising under control
In a bold move to soothe the sting at the forecourts, the Oil Fuel Fund Office (OFFO) unveiled its plan to keep Thailand’s diesel prices under a breezy 33 baht per litre, even though the current subsidy scheme is revving to a halt. This decision steers from an unexpected upturn in OFFO’s finances, courtesy of plummeting global oil prices.
Fiscal 2024’s figures saw a refreshing dip in OFFO’s losses, thanks to reduced outlays on domestic diesel subsidies. Although OFFO is sticking to its guns by supporting diesel prices through the fund, it has decided not to seek the cabinet’s go-ahead for extending the subsidy programme, said Pornchai Jirakulpisan, the OFFO policy and strategy department chief.
“We will maintain the stability of retail diesel prices at less than 33 baht per litre.”
Pornchai did give a nod to the unpredictable nature of global oil price swings, which could send their financial plans skidding.
Back in August, fortunes began to turn. Monthly revenue revved up by a neat 7 to 9 billion baht, chipping away at the losses, which had slimmed down to just over 99 billion baht by September’s end, a drop from July’s 112 billion baht. The bulk of these losses are tied to the diesel subsidy programme, alongside a chunk from liquefied petroleum gas (LPG) subsidies, said Pornchai.
“With the current financial status, we expect to settle debt owed to financial institutions by September 2028.
”OFFO is gearing up to start payments to creditors in November with a modest 139 million baht covering only the principal. We will then increase the principal payment each month, but this excludes interest worth 250-300 million baht monthly.”
This financial breather is all thanks to a slide in global crude oil prices during fiscal 2024, spanning from October last year to September this year. Average oil prices, based on Dubai reference markers, eased to US$81.6 per barrel from last year’s US$83.4. Diesel prices also took a nosedive to US$102 from US$112.9 per barrel, spurred by a dip in demand amid China’s economic lag.
“However, the diesel prices stayed stubbornly above the $100 mark, mostly attributed to the ongoing Russia-Ukraine conflict and the Israel-Hamas tensions.”
As for LPG, the government is keeping its cap at 423 baht per 15-kilogramme cylinder.
What Other Media Are Saying
- Pattaya Mail reports that OFFO allocates 1.2 billion baht for debt repayment amidst a 111.66 billion baht deficit, focusing on the financial strain of fuel subsidies and geopolitical impacts. (read more)
Frequently Asked Questions
Here are some common questions asked about this news.
Why is maintaining diesel prices below 33 baht crucial for Thailand’s economy?
Affordable diesel prices can stabilise transportation costs, impacting inflation and overall economic stability positively.
How do global oil price fluctuations impact Thailand’s subsidy strategies?
Changes in global oil prices affect fund liquidity, influencing decisions on subsidy allocations and financial planning.
What if global oil prices rise significantly? How might this affect OFFO’s plans?
Rising oil prices could strain the fund’s resources, potentially requiring policy adjustments or new subsidy strategies.
How might geopolitical tensions, like the Russia-Ukraine war, influence Thailand’s oil pricing policies?
Such tensions can cause oil price volatility, complicating efforts to maintain stable domestic prices and manage subsidies.
What are the potential long-term effects of settling debt by 2028 on Thailand’s fiscal policies?
Debt settlement could enhance fiscal flexibility, allowing for investments in infrastructure or social programmes, and boosting economic growth.
