Bangkok: Diesel prices surged by 6 baht, shocking the entire country and opening the door for a potential price drop above 60 baht. Experts urge the government to cut taxes before the economy falters.

According to Thai News Agency, Associate Professor Dr. Ath Pisalvanich, an expert in international and ASEAN economics, revealed on the Good Morning ASEAN program on MCOT News FM 100.5 that the 6 baht increase in diesel prices within a single day, from 32.94 baht per liter to 38.94 baht per liter, had a widespread impact on the public. The main reason was the reduction of the fuel fund subsidy from 26 baht to 19 baht, resulting in an immediate increase in the wholesale price.

However, the latest pricing structure reflects a likely easing of the oil shortage problem, as retail prices at the pump have returned to being higher than wholesale prices, reducing the incentive to rush to buy at the pump. This is unlike the previous period when wholesale prices were higher, leading to tight supply in the market.

Assoc. Prof. Dr. Ath emphasized that Thailand is not actually experiencing an oil shortage. The supply of crude oil and refined oil remains sufficient, even though diesel consumption has surged from 65 million liters to 85 million liters per day. There is still a surplus of approximately 16 million liters per day in stock. Therefore, the main problem lies more in managing the pricing structure than in the supply itself.

Without subsidies, diesel prices could soar to 50-60 baht per liter, especially given the uncertainty in the Middle East. Furthermore, deregulating prices too quickly, while still using old, low-priced fuel stocks, has forced the public to bear higher prices sooner than necessary and has already resulted in the Oil Fund being in a deficit of over 37 billion baht.

Experts have proposed that the government pursue a dual approach: managing the oil fund and restructuring the tax system, particularly reducing the excise tax by at least 5 baht per liter to keep diesel prices around 34 baht. They warn that allowing diesel prices to exceed 50 baht would severely impact the transportation, industrial, and agricultural sectors, risking stagflation.

Furthermore, it was noted that the reason for the price increase, which was to prevent smuggling to neighboring countries, reflects problems with lax law enforcement. It was suggested that the root cause of the problem be addressed instead of shifting the burden to the public.