Ekniti says no more subsidies to keep fuel prices artificially low

Ekniti says no more subsidies to keep fuel prices artificially low

Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas said on Saturday that Thailand could no longer keep using subsidies to hold fuel prices artificially low, warning that pushing support beyond the government’s fiscal capacity could trigger instability similar to the Tom Yam Kung crisis in 1997.

Speaking at the Meet the Press event at Government House, he said the prolonged Iran war and disruption to the Strait of Hormuz had forced the government to rethink how it manages the energy shock. The strait normally carries about one-fifth of global oil and liquefied natural gas flows, making prolonged disruption a major threat to world energy markets.

He said the government’s first priority remained the safety of Thai nationals before addressing the economic fallout that is now feeding into production costs, transport costs and household living expenses.

Government aims to avoid ‘a crisis on top of a crisis’

Ekniti said the government was using every available economic tool to cushion the blow and prevent the energy shock from spreading across the wider economy, particularly through the Oil Fuel Fund to help stabilise domestic energy prices.

However, he acknowledged that subsidies could not continue without limit because of fiscal constraints. If the government tried to hold prices down beyond its capacity, it could create systemic risks, echoing the lesson of the 1997 financial crisis, when Thailand lost foreign reserves through currency intervention.

“The key challenge is to strike a balance between short-term support for the public and long-term economic stability, so that we do not end up with a crisis on top of a crisis.”

Measures target costs across the economy

Ekniti said measures introduced so far had helped keep Thai fuel prices competitive compared with other Asean countries, showing how the Oil Fuel Fund had helped absorb some of the volatility.

He said the government had also instructed relevant agencies to contain costs on multiple fronts to prevent the energy shock from feeding into broader inflation.

Key measures include:

• The Commerce Ministry monitoring goods prices to prevent unjustified increases
• The Transport Ministry taking steps to hold transport costs steady
• The public sector cutting unnecessary spending and suspending overseas travel
• Promotion of work from home to reduce energy use

“These measures are aimed at breaking the cost cycle and preventing energy pressure from spreading into economy-wide inflation.”

More targeted aid planned for vulnerable groups

For the next phase, Ekniti said the Finance Ministry was preparing more targeted support, especially for low-income earners who have been hit hardest by higher living costs.

He said he would convene a meeting of the State Welfare Committee to consider increasing assistance under the state welfare scheme, along with other measures to ease day-to-day expenses.

“The budget is limited because it comes from taxpayers’ money, so it must be used in the most targeted and cost-effective way possible, with priority given to vulnerable groups.”

He said the government would continue using both fiscal policy and energy-related mechanisms to help the Thai economy weather the global crisis without causing long-term structural damage.

Background: Iran war deepens global energy crisis

The energy shock has intensified as the Iran war has disrupted flows through the Strait of Hormuz. Reuters reported that Brent crude has risen more than 50% since the war began, briefly topping US$119 a barrel, while analysts warned prices could climb even higher if further supply infrastructure is hit. Reuters also said the conflict has already cut global oil supply by around 11 million barrels a day, with Asia and Europe among the hardest-hit regions.

The impact is already visible in Thailand. Reuters reported on March 26 that the diesel price had risen from 29.94 baht per litre in February to 38.94 baht, pushing Thailand’s fishing industry towards a near standstill as fuel costs made many trips uneconomic.