Thai Oil supports a joint discussion of the Bank of Thailand, the Finance Ministry and the Energy Ministry on the establishment of a sovereign wealth fund, which could earn better returns from growing foreign reserves.
Surong Bulakul, chief executive officer of Thai Oil, said that with such fund, Thailand would have a mechanism to manage public-sector risks in the same way as Singapore, Malaysia and South Korea.
"Such a move is in line with the downward dollar-baht exchange rate. We need to admit that it is a risk for the Bank of Thailand to accumulate dollar-denominated reserves while the US dollar keeps weakening against the baht," he said.
"Partial reserves should be allocated for the sovereign wealth fund, which could be invested in energy sources for the Kingdom's energy security."
The executive said investing in energy projects was a risk-management scheme, as energy prices tend to rise in light of higher production costs as well as tight supply versus demand. It is believed that such an investment, aside from helping on the security issue, would generate a better return than leaving the dollars idle. Yet he acknowledged that details on the use of funds needed to be discussed by the three units.
Newly appointed Energy Minister Pichai Naripthaphan has floated the idea, with lukewarm response from the Bank of Thailand. The central bank, which is sitting on reserves of nearly US$190 billion (Bt5.67 trillion), is waiting for more details from the government.
Former prime minister Abhisit Vejjajiva cautioned during the government's policy testimony yesterday that it remained unclear whether such a plan would require an amendment in the law.
Oil prices have risen on speculation that the US Federal Reserve will take further steps to stimulate the economy in that country, but could weaken if Libya's oil output returns to the normal level of 1.7 million barrels a day, from 600,000 barrels per day currently, after the rebels end the rule of Colonel Mu'ammar Gadhafi.
Pongpun Amornvivat, commercial planner of Thai Oil, referred to analysts' forecasts that Brent crude oil should stay above $100 per barrel throughout next year mainly on high demand and tight supply. He noted that oil-price fluctuations were also aggravated by non-fundamental factors such as violence in Libya and hedge funds' participation in the futures market. Thaioil expects Brent to stay at $110 per barrel.
To cope with volatility, Surong said at a seminar yesterday that Thai Oil was interested in trading in oil futures, to be introduced soon by the Thailand Futures Exchange.