Thailand continues to limit diesel prices due to persistent energy issues

The Thai government is keeping energy prices low to ease the financial burden on households and businesses struggling due to pandemic and skyrocketing global crude oil prices, which are partially due to the ongoing Russia-Ukraine war. The retail diesel price is currently fixed at 33 baht per liter thanks to a subsidy from the Oil Fuel Fund.

Prime Minister Srettha Thavisin is following the price control policy on diesel introduced by the previous administration. While a previously introduced diesel excise tax cut has since ended, retail diesel prices are still held in check through the fund.

The government is cautious about hiking electricity costs, considering the Electricity Generating Authority of Thailand's (EGAT) significant losses from subsidizing electricity prices.

Continuous control on energy costs may have negative long-term effects, including discouraging energy efficiency efforts and hindering the necessary investments in eco-friendly fuel technologies.

One example is the delay in adopting the higher quality Euro 5 diesel, slated for January 1, 2024. This decision has received criticism, especially from oil refinery operators who invested billions of baht in Euro 5 diesel development.

To maintain low energy costs in 2024, the government went against local refineries' request to increase diesel prices by 0.5 baht per liter with the enforcement of the Euro 5 policy. Energy experts are emphasizing the need for a clear roadmap for the Euro 5 policy in Thailand.

The concern here is that long-term energy subsidies might discourage the public from adopting efficient energy use, which is crucial to address climate change. According to an economist at Thammasat University, Praipol Koomsup, the delay in adopting higher quality fuels can hamper Thailand's climate change initiatives.

In 2021, former Prime Minister Prayut Chan-o-cha committed at the 26th UN Climate Change Conference to making Thailand carbon neutral by 2050 and aiming for zero greenhouse gas emissions by 2065.

The management of energy consumption is an area that is often overlooked, experts say, especially when energy prices are low. For instance, when measures to reduce energy costs ended, gasoline and gasohol consumption reduced by 0.2% to 31.7 million liters per day in the first quarter this year.

Praipol suggests the government offer price subsidies selectively, targeting low-income earners instead of everyone to prevent government funds from depletion. As popularity-driven schemes may seem appealing, the government needs to be careful about the national debt, which could increase due to large expenditures on energy price subsidies.

File photo for reference only

-- 2024-07-01

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