Oil price could hammer indebted fuel fund

Escalating tensions between Israel and Iran are expected to drive up global crude oil prices, affecting the Oil Fuel Fund Office’s (Offo) debt repayment plan, says an official at the Energy Ministry.
Whether the US would support possible Israeli strikes on Iran’s oil infrastructure to retaliate against a missile attack remains unclear, leading to concern about oil price fluctuations, according to media reports.
Tehran fired at least 180 missiles at Israel in response to Israeli attacks in Gaza and Lebanon, as well as the killings of Hamas and Hezbollah leaders.
If Israel continues with its retaliation plan, the prospect of a surge in global crude oil prices could hardly be avoided, said the official, who requested anonymity.
Prices of crude oil futures increased after US President Joe Biden said Washington would discuss with Israel its conflict with Iran, according to media reports.
On Oct 3, Brent crude oil prices rose by 4.8%, closing at US$77.4 per barrel for November delivery, while West Texas Intermediate crude oil prices increased by 5.1% to $73.6 per barrel.
Analysts at Citigroup, a multinational investment bank and financial services firm, believe a major strike by Israel on Iran’s export capacity could take 1.5 million barrels of crude oil off the market each day, reducing global oil supply and driving up prices.
In August, Iran’s oil output reached a six-year high of 3.7 million barrels per day.
Research firm Clearview Energy Partners said if Israel strikes Iranian energy infrastructure, oil prices will increase by $13 a barrel. If the Strait of Hormuz is closed, prices will increase by $28 a barrel, said the researcher.
These scenarios would be negative for the financial status of the debt-ridden Oil Fuel Fund, managed by Offo.
Offo earlier said officials could reduce the payback period, settling all the debt by 2028, as global oil prices had fallen from more than $80 per barrel to slightly above $70 in August, the official said.
The government uses the fund to regulate domestic oil and gas prices. Higher global petroleum prices had led to higher price subsidies, while lower prices could allow authorities to collect more levies from oil users.
As of Oct 1, the fund has posted losses of 99 billion baht.
As the conflicts in the Middle East are likely to turn more severe, it will be impossible for Offo to clear its debt as planned, the official said.