Fuel price hike needed to protect Oil Fuel Fund

The government has defended the latest fuel price increase as a necessary step to protect the Oil Fuel Fund from deeper losses, saying the state could no longer absorb the full burden of surging global oil prices.

Phiphat Ratchakitprakarn, Deputy Prime Minister and Minister of Transport, said the March 24 fuel price adjustment, which raised diesel by 1.80 baht per litre and petrol by 2 baht per litre, was needed to reflect higher world market prices and maintain the fund’s stability.

He said the Oil Fuel Fund was currently running a deficit of more than 20 billion baht and was still paying around 2.3 billion baht a day in compensation, even after the latest price increase.

Oil price rise aimed at stabilising subsidy fund

Phiphat said that without any price adjustment, the fund would no longer be able to carry the burden because of fiscal constraints.

He insisted, however, that the government had not passed the full impact on to consumers, noting that the fund was still subsidising diesel by more than 24 baht per litre.

He added that authorities would continue monitoring global oil prices to assess whether the diesel price ceiling should be revised again if international prices continued to rise.

The minister also said the increase was important in helping to curb fuel smuggling to neighbouring countries, as Thai fuel prices remained lower than those in nearby markets, particularly Malaysia.

He said diesel in Malaysia had risen to about 38.10 baht per litre, creating a price gap that had become a strong incentive for smuggling Thai fuel across the border. Narrowing that gap would help reduce leakage into neighbouring markets.

Demand surge, not hoarding, blamed for pump chaos

Addressing the disruption seen at petrol stations, Phiphat said checks by the Interior Ministry in all 76 provinces had found no evidence of stockpiling by traders.

Instead, he said, the turmoil was driven by a sharp jump in demand, with daily fuel consumption rising from an average of 67 million litres to 82-84 million litres, and reaching as high as 110 million litres on some days.

To ease pressure on supply, the government has ordered the temporary removal of the additional reserve requirement, cutting it by 0.5% in March and 1.5% in April, so that more fuel can be released into the retail system.

It is also preparing to push B20 diesel into the market this weekend for the industrial, transport and fisheries sectors. The fuel will be priced 5 baht per litre below B7 in a bid to help lower operating costs.

Windfall tax on refineries under discussion

Phiphat said the Joint Management and Monitoring Centre for the Situation in the Middle East had discussed with the Finance Ministry the possibility of imposing a windfall tax on refineries if they posted unusually high profits during the crisis.

He said the idea was to use part of those gains to support the public, in line with measures adopted in some other countries.

However, he acknowledged that any such move would face legal hurdles and would require a formal legislative process, whether through an Act, an emergency decree or a royal decree.

He added that the Finance Ministry had not yet formally responded to the proposal and had raised questions over whether refiners would also need support if profits later turned into losses after the crisis ended.

Phiphat said the issue would require further study before the government could decide on the most appropriate course of action.