Fuel fund forecast: Thai govt keeps diesel prices low, faces a billion-baht burnout

Picture courtesy of Dailynews.

The Oil Fuel Fund Office (OFFO) projected a loss of nearly 100 billion baht due to the government’s decision to maintain domestic diesel prices below 30 baht a litre until December. This forecast assumes an increase in global diesel prices during the winter, a period typically marked by heightened energy demand.

In 2022, the average global diesel prices for August and September stood at US$116.7 per barrel. However, prices spiked to US$176 per barrel amid the conflict between Russia and Ukraine.

To subsidise the diesel price at 8.02 baht per litre and liquefied petroleum gas (LPG) at 9.2 baht per kilogramme, the Offo has been utilising funds. It also collects a levy ranging from 0.81 to 9.38 baht per litre from gasoline and gasohol users to support the fund.

Nevertheless, the daily levy collection of 153 million baht falls short of the 573 million baht in subsidies required to cap diesel and LPG retail prices.

As of October 3, the fund had incurred a loss of 62 billion baht, up from 49 billion baht before the general election in May, according to Wisak Watanasap, director of the OFFO. This escalating financial burden has forced Offo to seek several billion baht in loans from commercial banks, reported Bangkok Post.

The reduction in diesel prices is a key policy of the Srettha Thavisin Cabinet, which was resolved at its inaugural meeting to implement a new diesel price from September 20. The government aims to lower energy costs for motorists and manufacturers, who primarily depend on diesel.

To maintain the domestic diesel price at 29.94 baht, the government needs to reduce the diesel excise tax to 3.67 baht per litre, down from 5.99 baht per litre, in addition to using funds to subsidise the retail price.

Wisak mentioned that the Offo is closely monitoring a variety of factors that could impact global crude oil prices, including foreign exchange rates, interest rates, demand for oil from China, and the control of oil supply by Opec.

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Alex Morgan

Alex is a 42-year-old former corporate executive and business consultant with a degree in business administration. Boasting over 15 years of experience working in various industries, including technology, finance, and marketing, Alex has acquired in-depth knowledge about business strategies, management principles, and market trends. In recent years, Alex has transitioned into writing business articles and providing expert commentary on business-related issues. Fluent in English and proficient in data analysis, Alex strives to deliver well-researched and insightful content to readers, combining practical experience with a keen analytical eye to offer valuable perspectives on the ever-evolving business landscape.

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