Will the Cabinet extend diesel price cap when it expires on Oct 31?
Oil Fund will have to repay first instalment of loan in November
The Thai government’s diesel price cap policy at 33 baht per litre will expire on October 31. Currently, the Ministry of Energy is using the Oil Fund mechanism to subsidise the prices of diesel and household LPG (cooking gas) to prevent significant impacts from global energy prices on the people’s cost of living.
As of now, diesel costs 32.94 baht per litre.
As of October 17, the Oil Fund received daily contributions of 148 million baht from petrol, 142 million baht from diesel, and 2.35 million baht from LPG. This resulted in a daily net inflow of approximately 293 million baht, reducing the Oil Fund's deficit.
As of October 13, the fund had a deficit of 95.333 billion baht, with the oil account at 47.885 billion baht in the red and the LPG account at 47.448 billion baht.
However, in early November, the fund must start repaying the first principal instalment of over 100 million baht of the initial loan of 5 billion baht used to subsidise domestic oil prices. Repayment is due within three years starting in November.
Including the monthly interest payment of around 250 million baht, the fund will need to manage approximately 400-500 million baht in November for loan and interest repayments. The remaining debt, part of the total 110-billion-baht loan, will be repaid in accordance with the specified agreements.
According to a news report, the Ministry of Energy plans to propose a review of diesel prices to the Cabinet, as the current price cap of 33 baht per litre is set to expire on October 31. The ministry is expected to present this proposal in the last week of October.
If the Cabinet does not extend the cap, diesel prices will follow global market trends. This could lead to an increase in domestic diesel prices to above 33 baht per litre if global oil prices rise in the future.
The Ministry of Energy has outlined three potential options for the Cabinet’s consideration:
▪︎ Extend the current price cap of 33 baht per litre until the end of 2024.
▪︎ Allow the Oil Fund Management Committee to manage diesel prices without a cap, but recommend keeping prices below 33 baht per litre.
▪︎ Lower the price ceiling to 32 baht per litre, responding to public concerns that diesel prices are too high.
The decision will depend on the financial status of the Oil Fund and the repayment of loans, which will begin in November. Currently, lower global oil prices have allowed the fund to collect more revenue, aiding in debt repayment.
If the Cabinet lowers the price cap to 32 baht per litre, the fund's revenue from diesel contributions would drop from 1.66 baht per litre to 0.66 baht per litre. This reduction would impact the fund's ability to repay bank loans, potentially increasing monthly repayments, which could leave the fund with insufficient funds for loan repayments.
