Like many countries, Thailand’s businesses and industries are severely impacted by the sharp increase in fuel prices, a direct result of the Ukraine-Russia conflict. The country’s Oil Fuel Fund’s budget for diesel subsidy is running low and the government is now negotiating with major oil exporters like Saudi Arabia to purchase crude oil at below market prices.
Finance Minister Arkhom Termpittayapaisith told Thai daily The Nation, “We are lucky the government has successfully revived diplomatic ties with Saudi Arabia for the first time in over 30 years,” he said. “We hope Saudi Arabia agrees to sell us oil at a friendly price, at least until the Russia-Ukraine conflict is over.”
Today's fuel prices in Thailand are as below, as sold by Thailand's national oil company PTT:
- Diesel: Capped at THB 30 per litre (RM 3.79)
- RON 91 petrol: THB 39.88 (RM 5.04) per litre
- RON 95 petrol: THB 40.15 (RM 5.07) per litre
All petrol sold in Thailand have a minimum 10 percent ethanol content (E10). Likewise, all new cars sold in Thailand must have their fuel systems modified to accomodate E10 biofuel.
There's also the cheaper E20 and E85 gasohol, which has 20 percent and 85 percent ethanol content respectively:
- E20 gasohol: THB 39.04 (RM 4.93) per litre
- E85 gasohol: THB 32.34 (RM 4.09) per litre
Not all cars can run on E20 or E85. Cars that can run on E85 enjoy a 5 percent lower excise tax, which ranges from 10 to 50 percent, depending on CO2 emission.
Before the sharp increase, petrol prices typically hover around RM 4 per litre in Thailand.
That's RM 5.24 per litre for RON 95 petrol
Thailand limits its fuel subsidy only to diesel and LPG because these are fuels used by industries and businesses, while petrol is mainly used by private vehicles.
Subsidies for diesel and LPG are paid for by the Oil Fuel Fund Office (Offo), which has recently spending THB 7 billion (RM 880 million) a month to keep diesel prices below THB 30 (RM 3.79) per litre, and LPG at THB 318 (RM 40.16) per 15 kg gas cylinder.
The Offo fund however, is depleting fast and has recently taken on THB 30 billion (RM 3.79 billion) worth of emergency loans from commercial banks.
To keep debt under control, Thai laws (Offo Act) limit borrowings of Offo to below THB 40 billion (RM 5.05 billion) so the Thai government, under pressure from trade and industry groups to intervene, is looking alternative methods to fund the subsidy.
Thailand has more than twice the population of Malaysia. It is raising alarms on a monthly subsidy bill of RM 880 million, but Malaysia has paid a far higher RM 7 billion in fuel subsidies for January 2022 alone.
Based on 2021’s average crude oil prices, Malaysia is spending nearly RM 19 billion a year on fuel subsidies, which could balloon to RM 24 billion is the Ukraine-Russia conflict continues to affect global oil supply.
Yesterday, Finance Minister Tengku Zafrul told the Dewan Rakyat that a is necessary, but did not share any further details on the proposed countermeasures.
Keyword: Thailand’s budget for diesel subsidy running low, negos for lower oil price with Saudi Arabia