Global oil prices are expected to fall slightly as central banks continue to raise interest rates to tame high inflation, says the Oil Fuel Fund Office (Offo).
Lower oil prices should relieve the financial burden on the Oil Fuel Fund, which has been in the red after several billion baht was spent to subsidise domestic diesel prices last year when the impact of the Russia-Ukraine war drove up energy prices.
Economists expect central banks, led by the Federal Reserve and the European Central Bank (ECB), to keep increasing interest rates, which will cause a slight drop in fuel consumption, said Wisak Watanasap, director of the Offo.
The World Bank said last year central banks' decisions to raise interest rates in response to high inflation could lead to a global recession in 2023.
Last month, Fed policymakers raised interest rates by a quarter percentage point to between 4.75% and 5%, while the ECB decided to increase its three key interest rates by 50 basis points to 3-3.75%, according to media reports.
The Swiss National Bank increased its policy rate by 50 basis points in the same month, rising to 1.5%.
"The rising interest rates should indirectly decrease global oil prices, leading to a reduction of our financial burden," said Mr Wisak.
Dubai crude oil reference prices decreased from US$91.13 per barrel in October last year to $78.5 per barrel on average in March.
Prices will keep falling unless there are unexpected incidents by major oil-producing countries or geopolitical conflicts, according to the Offo.
Lower crude oil prices allowed the authorities to reduce retail prices of diesel to around 33 baht a litre, down from 34.94 baht a litre in early February.
Previous efforts to subsidise diesel prices cost the Oil Fuel Fund 130 billion baht. The loss has gradually decreased to 94.4 billion baht in March and 85 billion baht as of April 17 as global oil prices waned.
Of the 85 billion baht, 38.7 billion stemmed from the diesel price subsidy, while 46.3 billion was spent to subsidise liquefied petroleum gas.
The Offo no longer subsidises domestic diesel prices. Now it collects a levy from motorists to support the fund -- 5.74 baht a litre for diesel users and 0.31-2.3 baht a litre for drivers using gasohol, a mix of gasoline and ethanol.
The levy collection contributes 13.1 billion baht monthly to the fund.
However, Offo is expected to request a loan for the third time in the second half of the year. Earlier the office was granted a loan worth 30 billion baht, then a second valued at 20 billion to pay money it owed to oil traders as well as to support the fund.
