Government plans diesel rise as oil fund hits THB10 billion deficit

The war in the Middle East, which has caused oil prices to fluctuate and remain high, has led the government to continue capping diesel at no more than THB30 per litre.

As of March 11, 2026, the Oil Fuel Fund was subsidising diesel by THB16.97 per litre, a sharp increase from just THB0.74 per litre on February 27, 2026, one day before the United States and Israel attacked Iran.

A source at Government House said the Ministry of Energy reported the energy price situation to the Cabinet on March 10, 2026.

The Oil Fuel Fund Administration Committee kept diesel at THB29.94 per litre for another 15 days, from March 3-17, 2026, after which further relief measures for the public would be reviewed.

Global oil prices remain high, causing the Oil Fuel Fund to slip into deficit on March 8, 2026, at THB786 million.

If diesel subsidies continue, the deficit could reach THB10 billion by March 18, 2026, making an increase in retail refined petroleum prices necessary.

This could also require a cut in excise tax and consideration of an emergency decree to ease rules so the Finance Ministry can guarantee debt repayment by the Office of the Oil Fuel Fund, with the matter to be left for the new government to consider.

Under such a decree, borrowing would be capped at no more than THB40 billion.

Diesel set to rise after 15 days

Phiphat Ratchakitprakarn, Deputy Prime Minister and Minister of Transport, said the government was preparing measures to manage diesel prices after the 15-day freeze ends.

Diesel would be raised gradually by THB2 per litre, from THB29.94 to THB31.94, to reduce the burden on the Oil Fuel Fund, alongside the use of other tools such as excise tax cuts to ease the impact on living costs and the prices of consumer goods.

As a final mechanism, the government may seek cooperation from oil refineries to help shoulder the cost burden, although this would have to be considered carefully because when global prices fall, refineries would still be carrying the cost of higher-priced forward purchases.

If no conclusion is reached, other measures will be sought.

Auttapol Rerkpiboon, Minister of Energy, said that once the 15-day diesel price freeze ends, the government will continue using the Oil Fuel Fund mechanism to manage prices, even though the fund has moved back into deficit after paying subsidies of more than THB1 billion a day.

He said the fund had previously fallen as much as THB120 billion into the red at the start of the Russia-Ukraine war, and he remained confident it could still be managed alongside other measures.

He added that the retail diesel price remains near THB30 per litre, lower than the THB31.94 level in October 2025 before the government began its administration, and below the peak of nearly THB35.

As a result, consumer goods whose costs are heavily influenced by oil should not be rising at present and, in theory, should be cheaper than they were when prices were set against October 2025 levels.

THB30 billion in debt is still outstanding from the Russia war period

A report from the Ministry of Energy said that in response to the Russia-Ukraine war from 2022 onwards, the Oil Fuel Fund’s subsidies for oil and LPG drove it to a maximum deficit of THB132.671 billion on November 27, 2022.

That prompted the government of General Prayut Chan-o-cha to issue an emergency decree easing rules so the Finance Ministry could guarantee borrowing of no more than THB150 billion, with THB20 billion in borrowing capacity still remaining at present.

At the same time, about THB30 billion in loan repayments to financial institutions remains outstanding and is due to be fully repaid in 2027.

The Oil Fuel Fund began gradually repaying loans to financial institutions in 2024.

It now has THB30 billion in outstanding debt and is scheduled to clear all repayments in 2027.

The diesel price ceiling has also been raised from no more than THB30 to a maximum of THB35.

Meanwhile, excise tax cuts on oil between 2022 and 2024 were implemented nine times, with reductions ranging from THB5 to THB6.44 per litre, costing the state THB178.1 billion in lost revenue.

Oil shortfall estimated at 8.45 million barrels

A source at Government House said the Ministry of Energy had reported to the Cabinet on measures to manage Thailand’s fuel situation in response to the Middle East crisis.

The energy emergency is currently at Level 1, or green, but the ministry is working proactively by asking oil traders to speed up procurement of additional crude from production sources outside the Middle East.

This is intended to offset crude oil that may be lost because it cannot be transported through the Strait of Hormuz or because producers in the Middle East are unable to deliver.

The total crude shortfall expected in March 2026 is 8.45 million barrels, or 1,343 million litres.

However, additional crude procurement is progressing well, with the Ministry of Energy receiving confirmation from oil traders that sufficient extra crude has been secured to meet demand until the end of April 2026.

Criteria set for the highest severity level

If the fighting intensifies and affects the country’s energy security to the point that the situation is upgraded to the most severe level, or red, with fuel supply disruption lasting more than one month, or LPG supply disruption lasting more than 14 days, and fuel reserves falling to the minimum level required by law, the Ministry of Energy may consider asking the Prime Minister to impose fuel rationing measures under Section 3 of the 1973 Emergency Decree on the Amendment and Prevention of Fuel Shortages.

It may also propose energy-saving measures under the 2005 Emergency Decree on Public Administration in Emergency Situations, such as setting opening and closing hours for department stores and fuel stations, as well as imposing curfews to reduce electricity and fuel consumption.

Plan to raise oil reserves to 3%

So far, the Ministry of Energy has implemented the following measures to prevent fuel shortages:

• Suspension of exports. Using powers under Section 3 of the 1973 Emergency Decree on the Amendment and Prevention of Fuel Shortages, the Prime Minister issued Order No. 2/2026 dated March 6, 2026, on measures to address and prevent fuel shortages, requiring oil traders under the fuel trade law to suspend oil exports temporarily.

This covers refined products including petrol, gasohol, base petrol, high-speed diesel, Jet A-1 aviation fuel and liquefied petroleum gas (LPG), with the exception of exports to Laos and Myanmar.

• Higher legal fuel reserve requirements. Oil traders under Section 7 of the Fuel Trade Act 2000 have been ordered to raise reserves of domestically produced fuel from 1% of annual trade volume to 1.5% from March 31, 2026, and to 3% from April 30, 2026.

This requirement will increase Thailand’s legally required fuel reserves from 25 days to 27 days from March 31, 2026, and to 32 days from April 30, 2026.

Increase the biodiesel blend.

• Higher biofuel blending ratios in refined products. At present, the Department of Energy Business requires diesel to contain a minimum biodiesel blend of 5%. As of March 5, 2026, biodiesel was priced at THB32.06 per litre, equal to 1.13 times the price of base diesel (Bo), which stood at THB28.42 per litre, in order to reduce the use of base diesel.

The Ministry of Energy has raised the biodiesel blend to 7%, which will cut base diesel consumption by 1.2 million litres per day from the total daily consumption of 61.8 million litres.

It may also consider raising the biodiesel blend to 10%.

In addition, the ministry is considering using the Oil Fuel Fund to encourage users of gasohol E10 to switch to gasohol E20 by setting the retail price of E20 below that of E10, subject to the financial position of the Oil Fuel Fund.

• Temporary relaxation of diesel and petrol quality standards. The Department of Energy Business has enforced Euro 5 fuel standards for diesel and petrol products since January 1, 2024, in order to reduce vehicle emissions.

However, if the conflict between the United States, Israel and Iran worsens further and has a greater impact on Thailand’s fuel supply, the Ministry of Energy may consider easing diesel and gasohol standards to Euro 4 to give greater flexibility in sourcing diesel and petrol, since many countries have not yet adopted Euro 5 standards.

Thailand’s oil reserves are estimated at 95 days.

Sarawut Kaewtathip, Director-General of the Department of Energy Business, said at the academic seminar “Thailand’s energy security amid the global crisis: decoding risks towards the national response plan”, organised by Chulalongkorn University, that as of March 9, 2026, Thailand’s ready-to-use fuel reserves comprised domestic stocks sufficient for 39 days of consumption.

These are stocks already held in storage and tanks within the country and ready for immediate use, consisting of 3,389 million litres of legally required reserves, enough for 25 days, and 1,403 million litres of commercial reserves, enough for 14 days.

In addition, Thailand has already secured 7,050 million litres of oil in transit or under procurement, including 3,350 million litres in transit, enough for 26 days, which has already been loaded onto ships and is gradually being delivered into the country.

A further 3,700 million litres has already been contracted, enough for 30 days, and is located outside conflict-risk areas without passing through the Strait of Hormuz.

In sum, Thailand currently has sufficient oil to meet demand for no less than 95 days.