What To Know
- Thailand’s Oil Fuel Fund is coming under renewed financial pressure as rising global crude oil prices threaten to widen its deficit, raising fresh concerns over the sustainability of the government’s fuel price support measures.
- The Strait of Hormuz, one of the world’s busiest energy shipping routes carrying around one-fifth of global oil supplies, has become a focal point of concern as military activity intensified.
Bangkok Business News: Thailand’s Oil Fuel Fund is coming under renewed financial pressure as rising global crude oil prices threaten to widen its deficit, raising fresh concerns over the sustainability of the government’s fuel price support measures. Escalating geopolitical tensions in the Middle East have once again unsettled international energy markets, creating fresh uncertainty for oil-importing countries such as Thailand. This Bangkok Business News report examines how the latest developments are increasing pressure on the country’s energy subsidy system while challenging efforts to keep living costs under control.
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The government recently reduced retail diesel and petrol prices to ease the financial burden on households and businesses. While the move has been welcomed by motorists and transport operators, it has also increased the cost of maintaining subsidies through the Oil Fuel Fund. As of July 12, the fund was already running a deficit of 58.43 billion baht, with officials warning that losses could climb significantly if international crude prices continue rising.
Middle East tensions drive oil prices higher
Global oil markets have strengthened after renewed confrontation involving the United States and Iran reignited fears of supply disruptions in the Middle East. The Strait of Hormuz, one of the world’s busiest energy shipping routes carrying around one-fifth of global oil supplies, has become a focal point of concern as military activity intensified.
Shipping traffic through the waterway declined sharply on July 16 following renewed attacks and tighter security measures, fueling worries over possible supply shortages. The uncertainty quickly pushed benchmark crude prices higher.
West Texas Intermediate crude for August delivery rose to US$79.65 per barrel during Asian trading on July 17, placing it on track for a weekly gain of more than 11%. Brent crude also remained above US$84 per barrel, recovering from the sharp declines seen during the second quarter.
The International Energy Agency noted that although global oil production improved in June as Gulf exports partially resumed, output remains well below pre-conflict levels, leaving markets vulnerable to further disruptions.
Refined fuel supplies remain tight
The pressure extends beyond crude oil, with diesel and petrol markets also facing supply constraints. Russian refinery disruptions and export restrictions have reduced fuel availability, while several Middle Eastern and Asian refineries continue operating below normal capacity.
As a result, refinery margins have climbed to multi-year highs, particularly in the United States, where low inventories and strong demand have increased concerns about potential fuel shortages. Analysts warn that fuel prices may remain elevated even if crude oil prices stabilize because refining capacity cannot recover as quickly as crude supply.
Oil Fuel Fund deficit continues to widen
Thailand’s Oil Fuel Fund has seen its financial position deteriorate rapidly. Figures from the Oil Fuel Fund Office show the deficit widened from 57.36 billion baht on July 5 to 58.43 billion baht by July 12, an increase of 1.07 billion baht in just one week after the latest fuel price reductions.
The turnaround has been dramatic. On February 22, before regional tensions escalated, the fund still recorded a surplus of 2.39 billion baht. However, rising international oil prices quickly erased that buffer after the government introduced diesel price support measures, pushing the fund into deficit within weeks.
Government maintains cost-of-living support
Prime Minister Anutin Charnvirakul instructed Energy Minister Akanat Promphan to reduce retail fuel prices after global crude prices had previously eased. Following urgent meetings, the relevant energy committees approved cuts of 2.56 baht per litre for diesel and 2.51 baht per litre for petrol, effective from July 8.
The government believes lower fuel prices will help reduce household expenses, ease transportation costs and support businesses during a period of economic uncertainty. However, every reduction in retail prices increases the financial burden carried by the Oil Fuel Fund.
Deficit could exceed 100 billion baht
Energy Ministry officials caution that the fund’s financial position could worsen considerably if geopolitical tensions continue driving global oil prices higher. Any prolonged disruption to shipments through the Strait of Hormuz would likely place additional upward pressure on crude prices while increasing the cost of maintaining Thailand’s fuel subsidies.
Should the government continue supporting domestic fuel prices under such conditions, the Oil Fuel Fund’s deficit could once again exceed 100 billion baht, matching levels last seen in 2024. The challenge for policymakers will be balancing immediate relief for consumers with the long-term financial sustainability of the fund. As international energy markets remain volatile, Thailand’s fuel subsidy strategy will continue to face a difficult test in the months ahead.
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