Oil Fund subsidies draining coffers

The Energy Policy Administration Committee (Epac) has decided to have the price of liquefied petroleum gas (LPG), which is used as household cooking gas, gradually increase over the next three months.

The price which consumers pay will be allowed to approach its market price, as authorities are struggling to control huge spending to support an LPG price subsidy programme.

The LPG price, which currently stands at 363 baht per 15-kilogramme standard cylinder, will rise to 378 baht next month and continue to increase to 393 and 408 baht in August and September respectively, said permanent secretary for energy Kulit Sombatsiri, who sits on the Epac.

The new prices will be applied to Bangkok and neighbouring provinces. Households in other provinces may pay more due to transport costs added to the prices. The market price of LPG is now 460 baht.

Mr Kulit said authorities need to carefully manage the Oil Fuel Fund, which is used to support diesel and LPG subsidy programmes, as the amount of money is dwindling. So far the government has spent over 30 billion baht alone to cap LPG prices, he said.

The LPG price was fixed at 318 baht for months before the government decided to have the price increase to 333 baht in April and gradually rise to 363 baht this month.

To relieve financial burdens of low-income earners, authorities agreed to expand a 100-baht discount for LPG, scheduled to end this month, until Sept 30. There are currently 4 million people benefiting from the discount under the social welfare card scheme.

The Epac also decided to have energy giant PTT Plc fix the price of compressed natural gas (CNG) at 15.59 baht a kilo, compared to 21 baht, based on gas prices in Thailand's gas pool, to relieve the burden on the transport sector. PTT is the sole seller of CNG.

The government is also finding ways to better manage the outflow from the Oil Fuel Fund, with the latest focus on a plan to control ex-refinery prices. Deputy Prime Minister and Energy Minister Supattanapong Punmeechaow said energy officials are talking with the state legal advisory body, the Council of State, and the Office of the Attorney-General about whether it is possible to scalp some of the profits made by Thai oil refineries.

The move, which would make the retail oil price less expensive and limit the financial burden on the fund, comes almost at the same time as Kla Party leader Korn Chatikavanij raised queries over the increase in oil refinery margins by 10 times per litre, standing at 8.5 baht on June 10, compared with 0.87 baht on June 10 last year and 0.88 baht on June 10 in 2020.

The refinery margin, the difference between prices of crude oil and refined oil, refers to costs added to the crude oil price during the refining process. It eventually becomes part of the retail oil price that drivers pay at petrol stations.

The Petroleum Refining Industry Club, a unit under the Federation of Thai Industries, earlier defended the refinery margin, rejecting criticism that oil refineries are making high profits.

"The refining process incurs various expenses including transport and operation costs as well as insurance fees," said Bundit Thamprajamchit, chairman of the club.

Crude oil is also turned into different types of refined oil, including diesel, gasoline, jet fuel, LPG and fuel oil. Some are not profitable, causing oil companies to come up with "average" ex-refinery prices, based on the reference price of refined oil in Singapore.

Oil refineries also need to allocate a budget of 50 billion baht to improve production technology to make diesel that meets the environmentally friendly Euro 5 emission standard. Prime Minister Prayut Chan-o-cha at the cabinet meeting on Tuesday asked whether the 8 baht per litre CRM could be lowered to help ease the impact of high oil prices.

Source:
courtesy of BANGKOK POST

by YUTHANA PRAIWAN

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