The Oil Fuel Fund Office (Offo) is grappling with substantial losses and significant debt after five years of regulating oil and gas prices through subsidies. In response, officials are looking to amend the 2019 Offo Act to improve the fund’s liquidity and better manage the financial strains caused by these subsidies.
To explore the fund’s challenges, Offo has engaged an academic institution to investigate the impacts of global oil price volatility and provide recommendations that align with Thailand’s shift towards a low-carbon economy.
Proposed Amendments to the Offo Act
A key proposal involves narrowing the eligibility for price subsidies to effectively manage the diminishing resources of the fund. Energy authorities and analysts suggest targeting those who require assistance the most, rather than providing universal subsidies.
Proposed beneficiaries include street food vendors, truck drivers, and public transport operators. The national oil and gas company has already begun to limit their assistance to specific groups, subsidizing compressed natural gas prices for taxi and bus operators.
The head of policy and strategy at Offo indicated a shift towards providing targeted help to specific communities in light of the massive debts accrued from universal subsidy programs in previous years.
Public input during a recent hearing supported the focus on low-income groups like motorcycle taxi and tuk-tuk drivers, emphasizing that not all fuel users require state assistance. Additionally, suggestions were made for clearer definitions of what constitutes a “fuel price crisis” to determine when subsidies are warranted.
Fund Depletion Issues
The rapid depletion of the fund has been attributed to soaring global oil and gas prices, particularly after major geopolitical events. Prior to the crisis, the fund had over 30 billion baht but incurred expenses exceeding 130 billion baht in subsidies during 2022 alone.
To remedy the situation, Offo secured a loan of 105 billion baht to address its debts, which only covers interest payments, with plans to repay the principal amount of 1 billion baht later this year.
Despite these financial challenges, officials continue to extend fuel price subsidies, leading to calls for a balance between these programs and the sustainability of the fund.
In addition to loans, Offo is also implementing levies on gasohol users to support subsidy efforts, although this has sparked discussions on equity since gasoline users are effectively funding support for other fuel types.
Environmental Concerns of Energy Subsidies
Energy analysts warn that prolonged energy price subsidies may undermine efforts to promote efficient energy consumption, crucial in the fight against climate change. The low cost of fossil fuels may lead to increased energy consumption and a delay in achieving carbon neutrality in Thailand.
Experts agree that to foster energy-saving habits among the public, the government must reconsider its approach to fossil fuel subsidies. Without significant policy changes, energy-saving campaigns may struggle to resonate with consumers, potentially reversing progress towards sustainable energy usage.
