Thailand to hike diesel subsidy; will mean higher losses for Oil Fund

Thailand’s Energy Policy Administrative Committee (EPAC) has approved diesel subsidy and has decided to delay floating gasoline prices. The committee approved the Oil Fund’s subsidy for diesel by 60 satang (US$0.02) per liter on August 20th. Levies on petrol and gasohol products were also reduced as of August 21, 2012.
The committee’s decision will mean that the Oil Fund will incur a THB79 million (US$2.5 million) loss per day, against the loss of THB37 million (US$1.1 million) per day before the approval of the subsidy. As of August 12, the fund had already incurred a total loss of THB14.4 billion (US$464.4 million).
Energy Minister Arak Chonlatanon explained that the subsidy is aimed at alleviating the burden on the cost-of-living of consumers, and on the operating costs of business operators, who are greatly affected by increases in global oil prices.
Arak added that it was necessary for the government to subsidize the price of diesel fuel because the oil retailers’ marketing margin has dropped to 40 satang (US$0.01) per liter, against the acceptable THB1.50 (US$0.05) rate. The subsidy of 60 satang (US$0.02) per liter would raise the margin to THB1 (US$0.03) per liter.
The committee also decided to reduce the Oil Fund’s levy on petrol and gasohol products by 50 satang (US$0.2) per liter. E85 was not included in the levy reduction. The committee’s decision will reduce the Oil Fund’s levy on 95-octane petrol from THB6.50 to THB6 per liter (US$0.21 to US$0.19); the levy on 91-octane petrol will be marked down from THB5.20 to THB4.70 (US$ 0.17 to US$0.15). The Oil Fund’s levy on gasohol 95 will drop from THB1.30 to 80 satang (US$0.04 to US$0.03).
The committee’s decision also means that gasohol 91 will be subsidized by the Oil Fund to THB1.50 per liter (US$0.05), up from THB1 (US$0.03); while subsidy for E20 will increase to THB1.80 (US$0.06) from THB1.30 (US$0.04).
Subsidy for E85 remains the same at THB12.70 (US$0.41) per liter.
Chainoi Puenkosum, acting director of the Energy Fund Administration Institute (Public Organization), said that if global oil prices do not go down, the Oil Fund will continue to suffer further losses because it still has to continue to subsidize cooking gas until the government decides to float the price. (August 21, 2012)