Oil Fund mulls second B30bn loan

Oil Fund mulls second B30bn loan

Money needed to settle debts

Diesel continues to remain capped at 35 baht a litre, subsidised by the Oil Fuel Fund. (Photo: Varuth Hirunyatheb)
Diesel continues to remain capped at 35 baht a litre, subsidised by the Oil Fuel Fund. (Photo: Varuth Hirunyatheb)

The Oil Fuel Fund Office (Offo) is considering seeking an additional 30-billion-baht loan within March to repay debts incurred by using the fund to subsidise diesel and liquefied petroleum gas (LPG) prices.

This would be Offo's second loan request after it obtained an initial loan of 30 billion baht to reimburse oil traders.

Authorities capped the diesel price at 35 baht per litre and fixed the price of LPG, which is used as cooking gas, at 6.12 baht per kilogramme to ease the cost of living for households and businesses, said Wisak Watanasap, director of Offo.

The government diverted vast sums from the fund to subsidise diesel prices after Russia invaded Ukraine in February and sanctions were subsequently imposed by the EU on energy exports from Russia.

This led to an upsurge in global oil prices, reaching more than US$100 per barrel.

In order to maintain the retail price of diesel at 35 baht a litre, the government also needed to cut the diesel excise tax by 5 baht per litre as well as operate the subsidy programme using the fund.

Diesel is the main fuel used in the transport and industrial sectors.

Global oil prices later weakened, but the fund is still 121 billion baht in the red, Mr Wisak said.

The loss caused by the diesel price subsidy tallies 77.1 billion baht, while the loss from the LPG price subsidy is 44.3 billion.

Offo needs to seek an additional loan in order to settle the debts, he said.

Fuel pumps at a PTT petrol station. Varuth Hirunyatheb

The cabinet earlier allowed Offo to request a loan of up to 150 billion baht in total, but how much money it will be granted will be determined by the Public Debt Management Office, said Mr Wisak.

Last month Offo spent all the funds granted under the first tranche of the loan from the state-run Krungthai Bank and Government Savings Bank.

He said the new loan Offo plans to request is based on two diesel price ranges under the Singapore reference price: $110-115 per barrel and more than $150 per barrel in a worst-case scenario.

According to the Department of Energy Business, diesel consumption in Thailand rose by 17.4% year-on-year to 72.2 million litres per day (MLD) for the first 11 months of 2022, up from 61.8 MLD.

The department attributed the increase partly to the price subsidy from the fund and the excise tax cut.

The tax reduction is due to expire Jan 20.

Consumption of LPG grew by 7.1% year-on-year to 32.7 MLD, up from 30.6 MLD, between January and November last year.

Diesel and LPG were among the fuels that recorded increased demand following the full reopening of the country from July last year as Covid-19 eased, the department said.

The Energy Policy Administration Committee announced last month it would continue capping the price of LPG at 408 baht per 15kg cylinder until the end of this month in a bid to slow rising living costs.

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