A government panel has increased the reduction in the refining margin to 5 baht per litre, from 2 baht earlier, in a move aimed at easing fuel costs.
The change, approved on Thursday by the Energy Policy Administration Committee, will take effect from Friday until May 9, Energy Minister Akanat Promphan said.
A further reduction of 3 baht per litre will be imposed after May 9, he added.
Data from early April showed that margins at Thailand’s six main petroleum refineries had risen to an average of 14 baht per litre. However, refiners said they needed to cover higher-than-usual costs – including insurance and transport – because of the impact of the Middle East war.
The Ministry of Energy asked refiners to submit evidence to support their argument and assessed actual figures to determine an appropriate margin, with excess profits redirected to reduce fuel prices.
Mr Akanat said the calculation covers all petroleum products, including petrol and diesel. In the first two weeks of April, excess refining gains exceeded 5 billion baht and were used to subsidise diesel, which has seen the sharpest price increases.
The latest estimates show around 4 billion baht in excess gains, with a further 5 billion baht expected, which can be used for refinery-level price reductions.
Asked whether the margin cuts would immediately translate into lower pump prices, Mr Akanat said the figure represents only the base price at the refinery gate. The benefit could be applied in two ways: lowering retail pump prices or easing the burden on the Oil Fuel Fund.
B60-billion deficit
The fund is currently running a deficit of more than 60 billion baht. If the debt is not addressed promptly, consumers could face higher fuel prices in the future, making it necessary to manage both retail prices and the fund’s liabilities in parallel, the minister said.
Oil prices in Singapore – the regional benchmark – have risen recently, with diesel increasing by about 3 baht per litre. Thailand has yet to adjust pump prices, and the energy ministry seeks to manage available funds to maintain appropriate retail levels.
The oil fund committee is scheduled to review prices again later in the day, taking Singapore market trends into account, said the energy minister.
Going forward, he said fuel prices will no longer increase sharply by 5-6 baht per litre or be reduced by 3-4 baht at a time as in the past, but will be made gradually, although Singapore prices will remain the main reference.
The ministry plans to propose a 20-billion-baht loan to support the Oil Fuel Fund, he said, adding that the borrowing would remain within legal limits and is unrelated to the 500-billion-baht borrowing programme the government has been considering.
‘The borrowing will not reach 100 billion or 150 billion baht, as that would affect the fund’s stability,’ said Mr Akanat, referring to earlier reports that the Ministry of Finance would seek to guarantee up to 150 billion baht in borrowing by the fund.
‘We will negotiate with creditors to extend repayment periods and manage the fund to reduce losses from about 2.6 billion baht per day to a minimal loss, or slight increase of around 100 million baht per day, allowing debts to be repaid gradually without exceeding legal borrowing limits.’
The ministry is also continuing to subsidise fuel prices for the agricultural sector, freight transport and delivery riders, particularly fuels blended with biofuels, such as B20 and B7, which receive higher subsidies than conventional fuels, he added.