Thailand Cuts Diesel Prices Amid Global Oil Price Drop

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In an effort to ease financial pressure at the fuel pumps, Thailand's Oil Fuel Fund Office (OFFO) announced plans to maintain diesel prices below 33 baht per litre, despite winding down the existing subsidy programme. This decision follows an upturn in OFFO's financial outlook due to a global decrease in oil prices.

 

The fiscal year 2024 brought a reduction in OFFO's losses, as spending on domestic diesel subsidies dropped. Pornchai Jirakulpisan, leader of OFFO's policy and strategy department, confirmed that while the fund will continue supporting diesel prices, no cabinet approval will be sought to extend the subsidies. However, he acknowledged the potential for global oil price fluctuations to impact their financial strategies.

 

By August, OFFO's fortunes began to improve, with monthly revenues increasing by 7 to 9 billion baht. Losses decreased from 112 billion baht in July to over 99 billion baht by September. The majority of losses were due to diesel subsidies, with some related to liquefied petroleum gas (LPG) subsidies.

 

OFFO aims to repay debts to financial institutions by September 2028. Starting November, payments of 139 million baht will begin, initially covering only the principal, with plans to increase monthly principal payments while excluding interest costs ranging from 250 to 300 million baht.

 

The financial reprieve is attributed to lower global crude oil prices during the fiscal 2024 period. Dubai benchmark oil prices dropped to $81.6 per barrel from $83.4, while diesel prices fell to $102 from $112.9, partly due to reduced demand and China's economic slowdown. Nonetheless, geopolitical tensions, including the Russia-Ukraine conflict and Israel-Hamas issues, have kept diesel prices above $100.

 

Meanwhile, the government maintains the LPG price cap at 423 baht per 15-kilogramme cylinder, continuing efforts to manage energy costs domestically.

 

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-- 2024-11-01