Oil Fuel Fund in Thailand faces 84.3 billion baht loss

A confidential source from the Energy Ministry revealed that a meeting is scheduled this week to address the considerable loss of 84.3 billion baht (US$2.35 billion) incurred by the state Oil Fuel Fund due to its oil and gas subsidy programmes. Despite the substantial deficit, the fund’s financial status is deemed manageable.

The discussion will be spearheaded by a subcommittee managing the fund, under the leadership of permanent finance secretary Lavaron Sangsnit. The losses have been split between subsidising oil prices (37.8 billion baht/US$1.05 billion) and liquified petroleum gas (LPG) subsidies (46.4 billion baht/US$1.29 billion), reported Bangkok Post.

The source confirmed that the Oil Fuel Fund Office (OFFO) has the authority to request a loan amounting to a total of 110 billion baht (US$3 billion) in support of the fund. To date, banks have granted up to 75 billion baht (US$2.09 billion).

“We still have enough cash for the fund to serve as a buffer against energy price fluctuations.”

However, due to the substantial portion of the funds required for price subsidy schemes, officials are being tasked with finding more effective ways to manage and support them.

The OFFO spends an average of 200 million baht (US$5.59 million) daily on price subsidy programmes, with the larger portion of this, about 68-70 billion baht (US$1.9-1.95 billion) daily, being allocated for diesel subsidies. Gasohol, gasoline, and LPG prices are also subsidised by the fund.

As of last Friday, the authorities paid 4.62 baht a litre to subsidise diesel prices and 5.33 baht a kilogramme to subsidise LPG prices. The source noted that the recent decrease in the Platts oil reference prices in Singapore has lessened the financial strain on the fund.

To support the fund, contributions from gasoline and gasohol users of 0.16-8.88 baht a litre and fuel oil users of 0.06 baht a litre are required.

With geopolitical conflicts in the Middle East and Eastern Europe potentially escalating global crude oil prices, OFFO is keeping a close eye on these developments. Simultaneously, it is monitoring the expected slowdown of the Chinese economy which could lead to a decrease in global crude oil prices.

As of last Friday, crude oil prices, based on Texas Intermediate, Brent and Dubai reference prices, had risen to between US$76.8-80.9 per barrel.

In related news, the global oil market witnessed regionalization due to Red Sea attacks and rising freight rates, altering trade patterns. Tanker transits through the Suez Canal decreased, impacting oil prices and refining strategies.