What To Know
- Thailand is preparing to gradually reduce diesel subsidies as the Oil Fuel Fund faces mounting financial pressure, with its deficit projected to reach 100 billion baht as early as October amid persistently high global energy prices.
- The fund is currently about 80 billion baht in the red while spending roughly 770 million baht every day to cushion domestic fuel prices.
Thailand is preparing to gradually reduce diesel subsidies as the Oil Fuel Fund faces mounting financial pressure, with its deficit projected to reach 100 billion baht as early as October amid persistently high global energy prices.
Image Credit: Bangkok Business News
The fund is currently about 80 billion baht in the red while spending roughly 770 million baht every day to cushion domestic fuel prices. Midway through mounting concerns over household costs, this Bangkok Business News report examines how officials are preparing for a controlled withdrawal of subsidies rather than allowing the fund’s finances to deteriorate unchecked.
Global energy shock hits Thailand
International oil markets remain under pressure from conflict in the Middle East and disruption risks around the Strait of Hormuz. Diesel recently closed above US$195 a barrel, while officials expect international fuel prices to remain around US$180–190 toward the end of 2026.
Thailand has already felt the impact at the pump. Retail prices for petrol, gasohol and diesel increased by 0.85 baht per liter on September 15, while diesel has risen from its previous 30-baht-per-liter ceiling to around 40 baht.
The Oil Fuel Fund Management Committee has been closely monitoring the rapidly changing market and adjusting fund contribution rates. OFFO says the fund is spending more than 700 million baht daily supporting oil products and more than 10 million baht on LPG.
Subsidies could be gradually withdrawn
OFFO has prepared a crisis response plan centered on gradually reducing subsidy rates. The objective is to prevent the fund’s deficit from becoming unmanageable while avoiding a sudden jump in retail prices.
Further borrowing is another possibility. A 20-billion-baht borrowing facility approved in April has already provided 10 billion baht, leaving another 10 billion baht available.
Officials say government assistance may also be required because cutting subsidies would transfer more of the international energy-price burden directly to households.
LNG and clean power enter the equation
The Energy Ministry is also looking beyond oil. Authorities are considering greater reliance on long-term LNG contracts, which offer more predictable pricing than volatile spot purchases, alongside additional clean electricity supplies.
The government has separately said it is managing energy security through measures covering prices, supply and reserves as global markets remain volatile.
Ultimately, Thailand faces a difficult balancing act: protecting households and businesses from an international energy shock while preventing the Oil Fuel Fund from accumulating an increasingly unsustainable deficit. Gradual subsidy reductions, financing measures and alternative energy procurement could all become necessary as policymakers try to contain the wider economic damage.
