The domestic diesel price will remain unchanged at 32 baht per litre as authorities have decided to use the Oil Fuel Fund to subsidise the price once the waiver of the 5-baht diesel excise tax expires on July 20, says the Oil Fuel Fund Office (Offo).
The fund is needed to continue the diesel price control after this date because the cabinet is not authorised to approve measures, including renewing the excise tax exemption, which will have a binding effect on the new government.
The Offo will spend 4 baht a litre to partly pay for the excise tax, which will be imposed on motorists on July 21. It will also pay between 1 and 2 baht per litre for the remainder, depending on diesel prices under Singapore's Platts reference prices each day.
Wisak Watanasap, director of the Offo, expects authorities to spend 1.65 baht a litre from the fund this Friday.
This will allow authorities to maintain the domestic diesel price at 32 baht a litre.
Mr Wisak said the subsidy will keep the diesel price unchanged as long as the diesel reference prices do not exceed US$110 per barrel.
The capped price of 32 baht per litre is based on a foreign exchange rate of 34.6 baht against the dollar and the price of methyl ester at 33.9 baht per litre.
Palm oil-derived methyl ester is mixed with diesel to make biodiesel, helping the government depend less on fossil fuels and support palm oil sales in the country.
According to the Offo, the subsidy of 1.65 baht a litre will cost the fund 14.5 million baht a day.
The Prayut Chan-o-cha administration decided to waive diesel excise tax from Feb 18 last year to relieve the impact of the global oil price surge, but this led the government to lose a total of 158 billion baht in revenue.
The impact of the war between Russia and Ukraine was blamed for driving up global energy prices in 2022.
The tax exemption, together with the diesel price subsidy under the fund, played a key role in keeping the domestic diesel price at around 35 baht a litre.
The price of diesel has gradually fallen since early February this year to 32 baht a litre, in response to declining global oil prices.
Mr Wisak said the Offo no longer needs to spend money from the fund to subsidise the domestic price of liquefied petroleum gas (LPG), following the decline in global LPG prices.
The retail price of LPG in Thailand currently stands at 423 baht for a 15-kilogramme cylinder.