The debt-ridden Oil Fuel Fund will return to a healthy state if the global price of crude falls below US$80 per barrel, says an energy expert.
Thai Oil Plc (TOP), Thailand's largest oil refinery by capacity, expects global crude oil prices to keep falling to a range of $98-100 per barrel this week, down from $102.5-103.2 per barrel on average last week, based on Dubai and Brent crude oil reference prices.
The fund, which is used to support diesel and liquefied petroleum gas (LPG) price subsidy programmes, has recently been 115 billion baht in the red, causing the government to seek ways to curb its spending.
Praipol Koomsup, an economist at Thammasat University, said he expects global oil prices to stand within a range of $90-110 throughout the rest of this year.
He wants to see the price fall below his estimate, hoping the supply and demand of oil will jointly keep the price below $80 per barrel.
This would be the level at which the government would no longer need to spend money to put a cap on diesel and LPG prices, said Mr Praipol, who once sat on a committee of assistants to former energy minister Narongchai Akrasanee.
Authorities first began spending money from the fund to control the price of LPG, which is used as cooking gas by households, after the Covid-19 pandemic began to ease. A large amount of money was spent on capping diesel prices, which sharply increased following the onset of the Russia-Ukraine war.
Global oil prices remained at high levels as the war persisted, which also pushed up the prices of raw materials and farm products.
But the expensive oil prices are expected to ease, following efforts to curb soaring inflation through interest rate hikes by the US Federal Reserve and the European Central Bank, according to TOP analysts.
Higher interest rates are feared to lead to a global economic recession, a prospect that will reduce oil demand and eventually cause crude prices to go down.
The economic recession in the US and EU has already begun, but demand for oil will increase when the world goes into winter because of the need for heating, said Mr Praipol, citing opinions from energy experts.
At present, oil prices fluctuate mainly due to "sentimental" factors like worries over economic contraction, said Mr Praipol, adding that this makes it very difficult for analysts to precisely predict the direction of crude prices.
That is why it is hard to know whether the recent decline in the price of gasohol, a mix of gasoline and ethanol, by 8.1 baht a litre, will be temporary before the price increases when the cold season comes, he said.
National oil and gas conglomerate PTT Plc announced on July 26 that the price of the popular Gasohol 95 had fallen eight consecutive times to 37.05 baht a litre, down from 45.15 baht at the end of June.
Like Gasohol 91, Gasohol 95 has a 10% ethanol blend, but they have different octane rating numbers.