Regulating oil and gas prices by offering subsidies from the Oil Fuel Fund for five years has left the Oil Fuel Fund Office (Offo) with huge losses and substantial debt.
Authorities want to improve the fund's liquidity, mainly by amending the 2019 Offo Act to better deal with the financial burdens caused by oil and gas price subsidies.
Offo commissioned Thammasat University to look into issues adversely affecting the fund and to devise possible amendments, addressing the consequences of global oil price volatility as Thailand transitions to a low-carbon society.
What changes should be made to the Offo Act?
One proposal is to limit the number of people eligible for price subsidies in order to better manage the rapidly diminishing fund, according to energy authorities and analysts.
Offo is considering revising its energy price subsidy programmes to focus on groups who desperately need the help, rather than implementing universal schemes.
The focus should include street food vendors, truck drivers carrying goods, and public transport operators, according to the proposal.
National oil and gas conglomerate PTT Plc, the country's sole gas seller, already adopted the idea of only helping certain groups of people. The company subsidises compressed natural gas prices for taxi and public bus operators.
Pornchai Jirakulpisan, head of policy and strategy at Offo, said the office aims to help only specific groups of people in the future, allowing it to avoid the huge debt incurred after granting universal subsidies, especially in 2022.
The proposal was supported by energy analysts who aired their opinions during a public hearing on the Offo Act, co-organised by Thammasat University and Offo.
Authorities should target certain groups of people for assistance, including low-income earners such as motorcycle taxis and tuk-tuk drivers, as not all fuel users need state subsidies, said an oil trader working for a foreign energy firm.
The government must also come up with a clearer definition of a "fuel price crisis" to determine when subsidies for domestic fuel prices are justified, said the trader.
Input from the public hearing will be considered by authorities in amending the Offo Act, according to the office.
Why was the fund drained so quickly?
Authorities point the finger at the surge in global oil and gas prices in 2022, following the Russian invasion of Ukraine, and the global oil price fluctuations since 2023, which led former premier Srettha Thavisin to authorise fuel price subsidies for diesel and liquefied petroleum gas (LPG), which is used as cooking gas.
Before the war, officials had cash on hand of more than 30 billion baht in the fund. The government spent a huge amount subsidising domestic fuel prices, costing the fund 130 billion baht in 2022.
Offo sought a loan worth 105 billion baht to clear its debt, which was only enough to pay interest of 150-200 million baht a month.
The loan was granted in 2022 and runs through October of this year.
Authorities are committed to paying the principal, valued at 1 billion baht, in November this year.
Despite the significant financial burden, fuel price subsidy programmes seem to persist indefinitely, as policymakers often extend the subsidies beyond their expiration dates, said the oil trader at the hearing.
Authorities need to find a balance between subsidies and stabilising the fund to better control spending, said Bunchon Songsamphant, director for tax collection standards at the Excise Department, at the hearing.
In addition to seeking loans, Offo collects levies from gasohol users to support the subsidies.
These levies led to debates over fairness as gasoline users pay high taxes to subsidise diesel and LPG prices, said Rosana Tositrakul, a former Bangkok senator who monitors state energy policy, at the hearing.
At present, buyers of gasohol 91 and 95 pay 4.2 baht a litre as a levy and 5.85 baht a litre for excise tax through the fund, said Ms Rosana.
Gasohol 91 and 95 are blended with 10% ethanol. The numbers 91 and 95 indicate their octane ratings.
Gasoline users should receive some return from their high levy and tax payments, she suggested.
What are the impacts of energy price subsidies other than financial shortfalls?
Environmentally, subsidising energy prices for a long time could hamper efforts to promote efficient energy consumption, part of climate change campaigns, said energy analysts.
If policymakers prolong energy price subsidies, people will be less concerned about saving energy and ways to improve energy consumption, according to Praipol Koomsup, an economist at Thammasat University who was an assistant to former energy minister Narongchai Akrasanee.
Low fossil fuel prices for a prolonged period could slow efforts to deal with climate change, said Mr Praipol, calling into question when Thailand will achieve carbon neutrality, a balance between carbon dioxide emissions and absorption.
This means the long-term impact of price subsidies on people's energy consumption habits should be a concern, he said.
If people are told to prioritise efforts for energy efficiency, yet the government subsidises fossil fuel prices, energy saving campaigns are unlikely to be convincing, said a former energy executive who requested anonymity.
The lower the energy prices, the higher energy usage will be, said the executive. In contrast, without subsidies people tend to become more aware of their energy usage.
