Thai oil fund spending B1 billion a day on subsidies

Energy minister says experience from 2022 oil spike shows fund is resilient

The Thai government is widening efforts to curb demand for fuel, as it burns through cash fighting to keep domestic diesel prices artificially low amid surging global energy costs.

The state-run Oil Fuel Fund, which is now being used to subsidise diesel, is now losing more than 1 billion baht a day, acting Energy Minister Auttapol Rerkpiboon told the broadcaster MCOT on Wednesday.

The government estimates accumulated losses may reach 10 billion baht by March 18, according to cabinet documents released on Tuesday.

“The government will reassess the situation, taking into account the fund’s position and global prices, to determine the most appropriate next steps,” Mr Auttapol said.

But it will continue to subsidise fuel for now, he added, noting that the fund ran up losses of up to 120 billion baht during the early stages of the Russia-Ukraine war and eventually managed to get back into the black.

Thailand relies heavily on imports for its energy needs, and roughly half of its oil shipments come from the Middle East, leaving the country exposed to shortages if the conflict deteriorates or is prolonged.

While subsidies have shielded consumers from full-price diesel and cooking gas, other fuel costs are already rising, squeezing household budgets.

Officials on Wednesday again called for calm as some farmers and others in rural areas have begun hoarding fuel, despite repeated assurances that supplies remain adequate.

“There’s no need to panic,” Commerce Minister Suphajee Suthumpun told reporters at an event on Wednesday. “If the situation drags on, we’ll roll out additional measures. We’re following the situation closely.”

The government has suspended most oil exports to prioritise domestic needs, raised the ratio of biofuel blends to reduce crude oil demand, and mandated civil servants and state enterprise staff to work from home where possible.

In terms of the Oil Fuel Fund, Mr Auttapol did not elaborate on what action the government may take if losses swell. Possible measures may include gradually raising diesel prices or increasing the fund’s borrowing limit, with the Ministry of Finance acting as a guarantor.

The fund had a small surplus of around 2 billion baht before the latest energy crisis.

Since March 10, the fund has been subsidising gasohol 95 and 91 at 5.38 baht per litre, E20 at 7.22 baht, E85 at 2.28 baht, and diesel at 12.73 baht per litre.

Meanwhile, contributions from premium diesel and gasoline sales to the fund are 1.50 baht and 1.13 baht per litre, respectively.