Former Energy Minister Piyasvasti Amranand warned that fuel subsidies should not be a long-term measure, given external risks particularly conflicts in Iraq which may boost global oil prices and increase Thailand's burden.
"Energy prices reform must be carefully considered. The previous governments have turned energy policies into populist policies. Subsidising diesel and LPG with the Oil Fund finances does not save the country's expenses, but raise the country's burden. Diesel subsidies have led to a loss of over Bt100 billion in annual revenue. In three years, the amount has risen to Bt300 billion. Combined with LPG subsidies, that ran up to Bt500 billion. Some parties will need to shoulder the cost if the subsidies continue," PIyasvasti said at a conference on "energy reform for sustainability".
Iraq produces 3 million barrels of oil per day. In the past two weeks, Islamist militants swept through large swaths of northern and western Iraq. According to the UN, more than 1,000 people - at least three quarters of them civilians - were killed this month.
Piyasvasti also insisted that Thailand still needs the Oil Fund, to stabilise energy prices. Thanks to the Oil Fund, alternative fuels like ethanol are sold at a subsidised price to make gasohol products more attractive to motorists. Meanwhile, Thailand's energy imports will only increase in the future.
The Oil Fund should not be dissolved and it should continue with its role on energy price stabilisation and alternative energy promotion, he said. The energy expert also agreed that the prices of LPG/NGV as well as diesel should be adjusted upward.
The National Council for Peace and Order (NEPO) has exercised its power to keep diesel at Bt29.85 per litre.
Meanwhile, today, Finance Permanent Secretary Rungson Sriworasat announced that the NCPO today approved to extend excise tax waiver on diesel by another month, to the end of July, to maintain the pump price below Bt30 per litre.
Rungson noted that oil prices have been escalating on conflicts in Iraq. He urged all to cut down their consumption as fuel prices will eventually move along side with global levels.
Pailin Chuchottaworn, president and CEO of PTT, said that fighting in Iraq could also disrupt oil transportation in nearby countries like Iran and Saudi Arabia.
If the conflicts are prolonged, this could lead to a spike in oil prices, he said.