Thai Government Gas/petrol Fund?

[brennanstimpy]

I was told by my tutor that the reason gas prices are going up now is because the Thai government had a fund that they were slowly distributing throughout the country to gas companies to keep the prices of gas down when the rest of the world was paying really high amounts. Now, the gas fund has run out and the prices are going back up again. She told me she heard about it on the national news. Is this a legit story or a bunch of BS (not brennanstimpy)?

[lannarebirth]

I was told by my tutor that the reason gas prices are going up now is because the Thai government had a fund that they were slowly distributing throughout the country to gas companies to keep the prices of gas down when the rest of the world was paying really high amounts. Now, the gas fund has run out and the prices are going back up again. She told me she heard about it on the national news. Is this a legit story or a bunch of BS (not brennanstimpy)?

Sort of. The Thai government did subsidize fuel prices when the prices were quite high and those subsidies do need to be repaid as the price of oil has fallen. The reason prices seem higher right now though is because they've implemented a new 5 baht/ltr fuel tax to be phased in over the next 6 months(?). 1.5 baht of that was implemented a week or so ago.

[Ricardo]

Agreed, this really exists, the bulk of the deficit/subsidy was generated prior to the 2005-election, when rising world fuel-prices would have caused damaging price-increases. So there was a heavy subsidy. Which co-incidentally ended a week after the election, with the incumbent government re-elected, no surprises there !

The accumulated-debt is slowly being repaid by a levy, which has recently increased, while world-prices are so low. This responsible approach to public-finance is sadly not always the case.

[brennanstimpy]

This is really weird to me.

[tom21]

I was told by my tutor that the reason gas prices are going up now is because the Thai government had a fund that they were slowly distributing throughout the country to gas companies to keep the prices of gas down when the rest of the world was paying really high amounts. Now, the gas fund has run out and the prices are going back up again. She told me she heard about it on the national news. Is this a legit story or a bunch of BS (not brennanstimpy)?

They reduced the tax for 6 months when the price was high . that has been put back on

[KhaoNiaw]

They reduced the tax for 6 months when the price was high . that has been put back on

That's right. They're not introducing a new tax but phasing back in a tax that was suspended.

[Ricardo]

This is really weird to me.

'Smoothing' is a fairly-common strategy, for a government to use, to even-out the effects on their economies of a volatile factor.

Other examples might be buying/selling rice, or cocoa, or coffee. Or having an emergency-stock of oil stored 'in the ground'. Or using the central-bank's foreign-reserves to smooth the exchange-rate from day-to-day or over a period.

What I find weird is that in Thailand the government taxes fuel so lightly, compared to some farang countries, but perhaps they are constrained to some extent by the effects of smuggling, if Thai prices get too far out-of-line with neighbouring countries ?

Edited February 19, 2009 by Ricardo