The Effect of Abolishing the Oil Fund on the Thai Economy: a Computable General Equilibrium Analysis

Abstract

The Oil Fund of Thailand has been established to stabilize domestic fuel prices. Nonetheless, it could have a significant bearing on the energy market, resulting in an inefficient resource allocation and low economic growth. The main purpose of this study is to analyze the impacts of the Oil Fund abolition on Thailand’s economy and energy efficiency using a computable general equilibrium (CGE) model. The study shows that the abolition would lead to lower economic growth in the short run but a higher growth in the long run. However, the gain from economic growth could be outweighed by the loss from inefficient energy utilization both in the short run and in the long run. In addition, the Oil Fund abolition would undermine policies to promote alternative green energy, particularly the use of ethanol. In summary, the existence of the Oil Fund served the purpose of stabilizing domestic fuel prices and supporting the alternative green energy policy and energy efficiency, but suppressed economic growth. These findings highlight the need to carefully weigh the costs and benefits of energy market interventions.