The Energy Fund Administration Institute (EFAI) is considering terminating price subsidies for gasohol and biodiesel within three years because the existing structure interferes with the stability of local fuel prices.
The EFAI plans to hire the Petroleum Institute of Thailand to study the feasibility of the measure.
EFAI director Viraphol Jirapraditkul said four types of gasohol and biodiesel are subsidised by the state Oil Fund: gasohol 95 E20 and E85 and biodiesel B10 and B20. Liquefied petroleum gas (LPG) is also subsidised by the fund.
The subsidies are funded by levies on benzene, gasohol 95 E10, gasohol 91 and diesel.
This means some fuel users have to pay higher retail prices because the state Oil Fund uses the levies to subsidise pricing of other fuels in the local market.
Mr Viraphol said the pricing subsidy for the four fuels can be enforced for an additional three years after the State Oil Fund Act of 2019 takes effect on Sept 24.
"The EFAI's plan for the price-subsidy abrogation will comply with the new law, which is aimed at stabilising local fuel prices," he said.
Under the new act, the EFAI will be dismissed by late September and the Energy Ministry will establish the State Oil Fund Office to replace it.
"The new office will carry out the price-subsidy cancellation plan, but the new act allows the plan to be extended by another two years twice, so the new office will have seven years to carry out the plan," Mr Viraphol said.
The State Oil Fund Act of 2019 was announced by the Royal Gazette on May 27.
Mr Viraphol said the EFAI will have 120 days to carry out 16 related laws before the act takes effect on Sept 24 and the relocation of officials and staff to the new office begins.
The new act plans to limit the maximum level of liquidity and liability at 40 billion baht, while the fund can obtain loans for administration of up to 20 billion baht.
In the past, the state Oil Fund had no limitations on liquidity and liability.
Mr Viraphol said the new law is aimed at controlling the balance sheet of the state Oil Fund and preventing massive debts in the future.
When the fund needs to apply for new loans, the cabinet has to grant permission.
"Local fuel prices under the new act will be more stable, meanwhile the state Oil Fund will operate with a healthier balance sheet," Mr Viraphol said.
The state Oil Fund is divided into two accounts: the oil account had cash of 41.44 billion baht as of June 9. The LPG account remained in the red to the tune of 6.61 billion baht.
As of June 9, the fund had net cash of 34.83 billion baht.
The fund has cash flow of 1.37 billion per month, while the LPG account has cash flow of 29 million baht per month because global LPG prices are declining, reducing the need for local LPG subsidies.
Mr Viraphol said global crude oil prices during 2005-12 marked their highest level in history, in the range of US$100-147 a barrel.
At a Bangchak petrol station, a worker refuels a vehicle with B10 biofuel. Varuth Hirunyatheb
During that period, the state Oil Fund spent roughly 80 billion baht on subsidies, the Finance Ministry reduced the excise tax for diesel, and PTT Plc had to support the government's policy with a subsidy for natural gas for vehicles.
Mr Viraphol predicts global crude oil prices to stand at $60-70 a barrel this year as the global economy slows amid the US-China trade war and geopolitical conflicts worldwide.