Government suspends oil subsidies except diesel to avert financial crisis

Finance Minister Ekniti Nitithanprapas explained today that the government has decided to end Oil Fuel Fund subsidies on all finished oil products, to prevent the country from sliding into deep financial problems, similar to the “Tom Yum Kung” crisis in 1997.

Speaking at a ‘Meet the Press’ event today, he said that the Oil Fuel Fund is the only mechanism used by the government to maintain price stability and to cushion the impacts of oil price rises.

Since the trouble the Middle East began, he said that the armed conflict has escalated and driven up global oil prices, affecting all countries, adding that the Thai government has relied on the Oil Fuel Fund in its attempts to stabilise domestic fuel prices. This means, however, that the Fund has sustained heavy losses which, if left unchecked, may lead to a severe financial crisis.

He noted, however, that the pump price of diesel in Thailand, which is still being subsidised but at much lower level, is lower than in several other ASEAN countries.

Ekniti said that this is the first time in his life that the diesel price in Thailand is cheaper than in Malaysia, but he cautioned that, since the world order has changed, it is time for Thai people to adapt to the new circumstances, noting that it is unknown when the oil crisis will end.

Meanwhile, Energy Minister Atthapol Rerkpiboon has explained that the value of crude oil stocks in the country has risen in tandem with the global price rise, citing the case of gold, the price of which is constantly fluctuating in response to global trends.

He said that a panel, comprised of representatives from the Finance, Commerce and Energy ministries, has been formed to consider the proposal for a windfall tax on oil refineries and to reconsider oil refining costs, which were recently increased from two to six baht per barrel.

The energy minister insisted that the fuel shortages at service stations have gradually been alleviated, with only about 300 stations remaining closed due to lack of supply compared to more than 2,000 during the peak of the crisis.

He also said that the Energy Ministry has taken steps to ensure that there are no fuel shortages during the long Songkran holiday next month, adding that an additional 14 million litres of diesel have been imported, while Shell and Bangchak will be importing more. Moreover, the ministry will launch the ‘FuelNow’ application, through which motorists can check the status of over 10,000 service stations as they plan their holiday travel.

The minister offered his assurance that the Fund continues to subsidise the diesel price, which is costing it about 1.3 billion baht a day at the moment, resulting in 38 billion baht in total losses to date.