Government orders first-ever refinery price cut in diesel move

The government has, for the first time, invoked legal powers to force all six domestic refineries to cut ex-refinery diesel prices by 2 baht per litre, in a historic intervention aimed at trimming what the Energy Ministry described as excessive refining profits and easing pressure on the loss-ridden Oil Fuel Fund.

Energy Minister Ekanat Promphan said the Energy Policy Administration Committee, which he chairs, had approved the move following an urgent order from Prime Minister Anutin Charnvirakul for the ministry to speed up efforts to tackle soaring energy prices.

First legal intervention in refinery pricing

Ekanat said the decision marked the first time in history that the government had used legal authority to impose a discount on refinery prices based on the Singapore market reference.

A study by the Energy Policy and Planning Office found that gross refinery margins rose too sharply in March, averaging about 6 baht per litre. When additional premium and insurance costs were included, ex-refinery wholesale prices no longer reflected the actual cost of crude oil, he said.

As a result, the committee resolved to invoke powers under the Emergency Decree on Remedying and Preventing Fuel Shortages, B.E. 2516 (1973), requiring all six refineries to immediately reduce ex-refinery diesel prices for B7 and B20 by 2 baht per litre.

The measure will take effect once it is published in the Royal Gazette. Additional retail price cuts may also be considered at the Oil Fuel Fund Management Committee meeting on April 8.

‘Singapore Discount’ model replaces old reference

Ekanat said the new pricing mechanism would move away from the old 100/100 Singapore reference model and instead apply what he described as a “Singapore Discount”.

He said the change was necessary because Singapore reference prices had at times surged to nearly US$300 a barrel, far above the actual crude prices paid by Thai refineries.

He insisted refineries would remain profitable even after the cut.

“This 2-baht reduction is a cut in excess profit, not a move that would push refiners into losses,” he said, adding that the measure would help support the Oil Fuel Fund, which is now running a deficit of more than 50 billion baht and paying more than 1 billion baht a day to subsidise diesel.

The committee will review refining margins weekly and could increase the discount to 3, 4 or even 5 baht per litre if margins remain elevated throughout April.

Biofuel push steps up alongside refinery controls

Alongside the ex-refinery price measure, the government is also stepping up its biofuel policy to reduce reliance on imported oil, with the following targets:

B20 pumps must be installed by April 20 on all main highways, or roads with two-digit route numbers, at intervals of every 100 kilometres to serve trucks and freight operators.
The Oil Fuel Fund will provide greater price support for B20 than for B7 to encourage transport operators to switch to domestically produced fuel.
If the ex-refinery pricing measure helps narrow the gap in pump prices, the government will use surplus funds to gradually repay Oil Fuel Fund debt and strengthen long-term stability.
Refineries told to cooperate

The Energy Ministry said discussions had already been held with refinery operators. Although some did not attend the morning talks, Ekanat said all six refineries would be required to comply once the resolution took effect.

The government also insisted the measure would not hurt refinery liquidity or production capacity to the point of causing crude shortages, saying forward procurement plans had already been checked and remained sufficient.

Ekanat said the crisis could not be addressed through occasional one-off donations from large energy firms, but required a fair and systematic arrangement under which all refineries shared the burden equally.