Affordability of Diesel Subsidy

The Democrat-led government has been keeping energy prices cheap in a bid to relieve economic burdens of the public and control product prices, notably by pinning diesel prices under 30 THB/liter. As a result, many sides are voicing concerns that the energy policy and intervention of the government in energy costs will harm the country in the long run rather than giving benefits.

Energy expert Manoon Siriwan stated that the national income would be impacted if the government kept pegging diesel prices further. He admitted that the government might not be able to shoulder the expenses in the long-term since the global crude oil price this year could touch 100 USD/barrel following the global economic recovery, depleting oil fund and declining oil stocks.

Mr Manoon however disagreed if the government would search other sources of fund to subsidize diesel prices because it would lose a lot of income or about 18 billion THB in oil excise tax. He continued that the government did not need to keep the prices below 30 THB/liter but could increase the price ceiling by additional 1-2 THB/liter to reduce burden of the fuel oil fund.

Echoing the viewpoint of the energy expert, Susco Managing Director Mongkol Simaroj voiced his opinion that the attempt of the government to pin diesel prices would be beneficial only in a short term, but it would not be good for the national energy structure in the long run. He added that the fuel oil fund was facing liquidity problems as the 5 billion baht fund is drying up, and more loans must be sought to fulfill the objective of the fund.

Diesel price is key player in the costs of transportation and other goods and services; nevertheless, the attempt to pin the price would not be beneficial in the long-term for the national financial status. Instead of injecting money to subsidize the energy cost, it might be better for the government to let energy cost fluctuate naturally and to spend the fuel oil fund on alternative energy development.

Source: NNT: Affordability of Diesel Subsidy

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