Rising diesel consumption in Europe during the winter is expected to drive up global oil prices, despite the prospect of a worldwide economic slowdown, says the Oil Fuel Fund Office (Offo).
High prices of liquefied natural gas and a lack of supply from Russia to Germany via the Nord Stream 1 pipeline due to a turbine engine malfunction is forcing Europe to find alternatives, including diesel and bunker oil, as fuels for electricity generation.
Although there is a possibility of a global recession, this is unlikely to lower crude oil prices in the world market because of higher electricity demand in Europe during plunging winter temperatures, said Wisak Watanasap, director of the Offo.
Given this factor, together with the government's need to earn money to support the loss-ridden Oil Fuel Fund, Thai motorists are unlikely to see a decline in domestic prices of diesel and gasoline, he said.
Diesel prices in Bangkok and neighbouring provinces have stayed at 34.94 baht per litre since the middle of June, although Dubai crude oil reference prices fell to US$82.92 per barrel yesterday, down from $175.8 per barrel on average in June.
"Domestic diesel prices will not immediately decrease following lower global oil prices due to losses incurred by the Oil Fuel Fund," said Mr Wisak.
The fund has already racked up losses of more than 124 billion baht after being used to subsidise diesel and liquefied petroleum gas (LPG) prices.
Officials have spent 82.7 billion baht capping diesel prices and 42.5 billion subsidising LPG prices, he said.
When global oil prices fall, domestic diesel retail prices are going to stay unchanged in order to collect a levy for the fund, said Mr Wisak.
As of Wednesday, the fund was receiving a levy of 1.15 baht per litre of diesel.
Another factor keeping domestic prices of diesel steady is the baht's depreciation, as Thailand depends mainly on oil imports.
If the baht weakens past 38 to the US dollar, Thailand will pay more when buying oil from overseas.
According to Offo, officials will continue to subsidise the price of LPG, which is capped at 408 baht per 15-kilogramme cylinder until the end of October.
