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During a 1 July election rally, Pheu Thai party candidate Yingluck Shinawatra, expected to be first female Prime Minister when the Election Commission validates the recent poll’s results, said that her party would scrap the Oil Fund so that the prices of gasoline and diesel would immediately be reduced.
Yingluck said back then that the Fund tax levies would not be replaced, making the retail prices of premium gasoline and diesel much cheaper, The Nation Online reported.
After the Pheu Thai party won 265 of the 500 House seats in the 3 July polls, Yingluck told reporters four days later that the new government had no plans to abolish the Oil Fund, but instead would only temporarily suspend gasoline and diesel levies.
Thailand established the Oil Fund in March 1979 to ameliorate the impact of future global oil price increase on the Thai economy. When world oil prices rise, Oil Fund taxes collected earlier are used to minimize upward price adjustments.
Abolishing the Oil Fund would also mean that biofuel gasoline and biodiesel subsidies would also be affected, hampering the government's promotion of alternative energies. Subsidies for liquefied petroleum gas (LPG), heavily used for cooking and vehicles throughout the country, would also be affected.
Accordingly, some Pheu Thai party officials have suggested that royalties on oil and natural gas concessions, amounting to more than $1.33 billion annually could also be tapped to cover some of the loss of the Oil Fund energy subsidies and lessen their impact on the electorate.
By. Charles Kennedy, Deputy Editor OilPrice.com
Charles is a writer for Oilprice.com