Extra B6.7bn fuel subsidy to come from energy fund

The government has approved the use of 6.7 billion baht from the Energy Conservation Fund (Enconfund) to help contain rising fuel prices, according to an energy official familiar with the matter.

The Finance Ministry approved the measure on Oct 22 as part of efforts to ease the impact of surging global oil prices on consumers.

However, officials acknowledged the amount is insufficient to fully offset oil price volatility, prompting Energy Minister Akanat Promphan to introduce additional measures on Oct 28 aimed at lowering Thailand's gross refining margin (GRM) and slowing increases in domestic fuel prices.

The latest intervention comes as the state Oil Fuel Fund struggles under accumulated debt of around 105 billion baht, incurred through efforts to stabilise domestic energy prices during periods of heightened global market volatility.

According to the official, the allocation of 6.7 billion baht represents the first tranche of a planned 14-billion-baht withdrawal from Enconfund.

The fund, which is financed through a levy of 0.05 baht per litre on fuel sales, was established to promote energy conservation and efficient energy use.

Finance Minister Ekniti Nitithanprapas indicated the initial 6.7 billion baht will be spent this year, while additional withdrawals are expected to be considered later for spending in 2027, the official said.

The government is grappling with the burden of the Oil Fuel Fund's debt, which expanded as authorities sought to shield consumers from the impact of volatile crude oil prices amid ongoing geopolitical tensions, including war in the Middle East.

Officials said borrowing options are limited because public debt levels must remain below the government's ceiling of 70% of GDP.

"Oil prices are rising because of the war. The government is using money from the Enconfund to help keep prices down, but no matter how much we put in, it's never enough," said another official who requested anonymity.

The official said it remains unclear whether the government's broader plan to draw additional funds from Enconfund can be fully implemented, noting that details of the proposal remain scarce.

In a separate effort to improve fuel price management, the Energy Policy Administration Committee instructed Thailand's six oil refineries to recalculate ex-refinery prices.

Under the new approach, domestic fuel pricing will no longer rely on Singapore's refined oil benchmarks.

Mr Akanat said the move to reduce GRMs, the difference between crude and refined oil prices, follows findings of what he described as "untrue costs" embedded in Thailand's fuel pricing structure that have imposed an estimated burden of 10.8 billion baht a year on consumers.

Those costs have been incorporated into domestic fuel prices since 2004 under a pricing formula based on Singapore's refined oil prices, together with additional expenses, according to the minister.