Russia's invasion of Ukraine has pushed up global oil and gas prices as well as inflation, forcing the government to pour more cash into fuel price subsidies.
Oil prices have risen sharply following strong economic post-lockdown recoveries and the war in Ukraine drove the prices up further to more than US$100 (3,329 baht) per barrel recently. Although prices have gradually declined since, oil remains at a premium.
According to an Energy Ministry report presented to cabinet last week, the State Oil Fund paid an average of 7.25-7.6 billion baht per month in subsidies to maintain the retail price of diesel at 30 baht per litre from January to February, a price still considered relatively high. As a result, the fund was 29.3 billion baht in the red as of March 13.
The cabinet then approved lifting the fund's 40-billion-baht borrowing limit, in a move designed to offer the government more leeway to cope with the surging fuel prices caused by the Russia-Ukraine conflict.
LPG or cooking gas is used by both households and food vendors while diesel is a major expense which many businesses, including public transport, must bear, so it is reasonable that the government focuses on subsidising these fuels.
In terms of oil consumption, however, petrol and diesel are the two major petroleum products in this sector. The government has allowed petrol prices to increase freely while spending more than seven baht per litre to keep diesel down.
In February, the cabinet decided to cut excise tax for diesel by three baht per litre from 5.99 baht for three months while maintaining a high tax charge for petrol at 5.85-6.50 baht per litre. The move was aimed at reducing the burden of the oil fund, but has been criticised for being a means with which to have petrol users subsidise diesel.
The government is not prudent in providing blanket subsidy for all diesel motorists while letting all petrol motorists suffer from oil price hikes.
It must bear in mind that any diesel subsidy not only benefits trucks and transport vehicles, but is also a reduction enjoyed by owners of some high-performance luxury cars with turbo-charged engines which run better on diesel.
Meanwhile, petrol is indispensable for low-income earners who use motorcycles as their main form of transport, or for their petrol-guzzling but much-needed family cars. Many also ride for a living, with fleets of motorcycle taxi drivers and delivery riders stationed up and down the country, working long hours for low wages. There are 21 million motorcycles registered currently, and none of their owners benefit from the government's blanket subsidy on diesel.
The government must find new ways to subsidise diesel in a more targeted manner, so those businesses that need the savings the most can continue to receive lower-than-market price fuel, but not the wealthy, or more robust businesses with the financial largesse to cope.
Selective government support would be the fairest option and the government should consider modifying the subsidy programme by handing out discount cards or coupons to specific groups of diesel users that need the help, in a similar fashion to the co-payment economic stimulus scheme.
At the meantime, the government also needs to help those who rely on petrol to make their living, as for those legions of rush-hour riders, miles on the clock equates to the dinners on the table, and the cost petrol affects them greatly.
