The Oil Fuel Fund Office (Offo) is exploring modifications to its pricing subsidy programs to streamline debt management and focus assistance on the most vulnerable populations.
To enhance its fund management since the enactment of the Offo Act in 2020, the agency is collaborating with an academic institution for a comprehensive evaluation. The insights gained will be used to enhance operational efficiency.
Officials are advocating for updates to regulations to align them with the evolving oil and gas markets, both domestically and internationally. One key proposed change involves restricting subsidies to low-income households and businesses, ensuring a more sustainable approach to fund utilization.
Targeted beneficiaries would include street food entrepreneurs, transport truck drivers, and public transportation service providers. The national oil and gas entity has already adopted this targeted strategy, subsidizing compressed natural gas solely for taxi and public bus drivers.
“Our future approach will focus on assisting specific groups,” stated a senior official with Offo. “This strategy will help us mitigate the significant debts incurred from universal subsidies, particularly those implemented in 2022.”
The turmoil stemming from the geopolitical crisis in Ukraine in 2022 caused a spike in global oil and gas prices, compelling the government to allocate substantial funds to subsidize local fuel prices. The fund incurred a massive expenditure of 130 billion baht in diesel subsidies during that year.
To manage its financial obligations, Offo secured a loan of 105 billion baht, which currently covers only the interest payments amounting to 150-200 million baht monthly. These payments will continue until October, with a commitment to settle the principal by November.
Despite the significant financial losses from diesel and cooking gas price subsidies, Offo maintains that the fund remains manageable, attributed to the levy collected from gasoline and gasohol sales directed toward the fund.
As of August 2, the fund’s levy collections reached 2.73 billion baht monthly, with the current diesel subsidy set at 40 satang per litre and the LPG subsidy at 4.18 baht per kilogram, equating to 63 baht for a standard 15kg cylinder.
If global crude oil prices stabilize at $80 per barrel and the diesel reference price in Singapore does not exceed $100 per barrel, the current debts are projected to be resolved by 2028.
