Oil Fuel Fund set to be replenished next month

Oil Fuel Fund set to be replenished next month

The Oil Fuel Fund Office (Offo) expects to obtain the first portion of loans as part of a total of 20 billion baht from commercial banks next month as its fund, used to subsidise energy prices, is nearly empty.

The loans are to repay oil and gas traders the money they used to cap diesel prices at 29.94 baht a litre and fix prices of liquefied petroleum gas (LPG) at 318 baht per 15-kilogramme standard cylinder under the government's price subsidy programme, said Offo director Wisak Watanasap.

The Offo has spent a total of 61.6 billion baht subsidising diesel and LPG prices since last year, Mr Wisak said.

The market price of diesel, including taxes, is estimated at 39-40 baht a litre, while the market price of LPG is 615 baht per cylinder.

With the Dubai crude oil reference price at US$109 a barrel, the Offo expects to spend 16 billion baht a month to subsidise the diesel price and 3 billion baht monthly to subsidise LPG.

Global oil prices have risen rapidly since late last year after the easing of lockdown measures and the reopening of many countries to jump-start their economies, which led to higher demand for oil.

The ongoing Russia-Ukraine war, which started in late February, accelerated the oil price spike.

To help businesses and households cope with higher energy prices, officials have spent more money from the Oil Fund, leading to the loan request.

Bangkok Bank, Siam Commercial Bank, Government Savings Bank and state-owned Krungthai Bank are among the key lenders.

The loans carry a three-year payback period.

Once global oil prices decline, the government may not reduce the domestic oil price in order to collect levies from motorists for loan repayment, according to the Offo.

To relieve pressure on the debt-ridden Oil Fuel Fund, energy authorities agreed to halve the diesel excise tax, usually charged at 5.99 baht, for three months.

Authorities also gradually raised prices of LPG, which is used as cooking gas by households.

From April 1, the LPG price is set to increase by one baht per kg, pushing up the price of a 15kg cylinder to 333 baht.

An additional one-baht increase on both May 1 and June 1 should drive up LPG prices per cylinder to 348 baht and 363 baht, respectively.

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