Offo eyes new diesel cap

Offo eyes new diesel cap

Large price dips are not expected as the Oil Fuel Fund needs to raise money

Motorists refuel their motorbikes at a PTT petrol station.
Motorists refuel their motorbikes at a PTT petrol station.

The Oil Fuel Fund Office (Offo) is considering putting a new cap on the domestic diesel price via its subsidy scheme next week, following the recent decline of diesel reference prices in Singapore.

However, it is unlikely any price decrease will align with lower global diesel prices because the office needs money to support the dwindling Oil Fuel Fund, said Wisak Watanasap, director of the Offo.

The fund has played a key role in curbing Thai diesel prices during the global oil price surge, but because of its limited budget, the government has had to gradually reduce its diesel subsidies.

Since mid-June, the diesel price in Bangkok has been fixed at 34.94 baht a litre.

Officials need to consider a new capped price as the existing price under the subsidy scheme is scheduled to expire at the end of this month.

On Wednesday, the diesel reference price saw a significant decline of US$9.38 per barrel, from $123.77 per barrel, according to the Offo.

The decrease could have led to lower domestic diesel prices of 32-33 baht a litre, but the capped prices have stayed unchanged because officials need to earn money for the fund.

Mr Wisak said the fund racked up losses of 124 billion baht as of Thursday. Up to 80.4 billion baht has been spent subsidising diesel prices, while 43.2 billion has been spent on subsidies for liquefied petroleum gas, which households use as cooking gas.

The government previously proposed a controversial plan to collect a windfall tax from oil refineries to inject more money into the fund, but the proposal drew fierce opposition from oil companies.

The tax is imposed on part of the oil refinery margin, the difference between prices of crude oil and refined oil, referring to costs added to the crude oil price during the refining process.

The margin eventually becomes part of the retail oil price, which drivers pay at petrol stations.

He said the cabinet is expected to extend the price subsidy programme for gasohol, a mix of gasoline and ethanol, and biodiesel, a mix of diesel and palm oil-derived methyl ester, for another two years.

The existing subsidies are scheduled to end on Sept 24.

Officials allocated money from the Oil Fuel Fund to subsidise gasohol E20 by 0.82 baht a litre, gasohol E85 by 0.53 baht a litre, biodiesel B10 by 0.5 baht a litre, and biodiesel B20 by 3.5 baht a litre.

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