Energy Ministry weighs exit strategy to cut fuel subsidies as oil fund deficit exceeds 100bn baht

Thailand’s Oil Fuel Fund has begun scaling back diesel support as its deficit has passed 100 billion baht, an Energy Ministry source told Bangkok Biznews in a report dated October 7, 2026. The ministry is preparing a gradual withdrawal of subsidies to slow cash outflows while awaiting policy direction on further measures.

The Oil Fuel Fund Office’s October 4 financial statement put the fund’s net deficit at 98.942 billion baht, comprising 58.429 billion baht in the oil account and 40.513 billion baht in the liquefied petroleum gas (LPG) account. The ministry source’s subsequent estimate above 100 billion baht reflects continued pressure from fuel and cooking-gas subsidies. 

Oil fund subsidy payments fall to 375 million baht a day

The Oil Fuel Fund’s daily subsidy payments have fallen to 375 million baht from an earlier level of up to 700 million baht, according to the ministry source. The reductions are intended to prevent the fund’s liquidity crisis from worsening.

The Fuel Fund Executive Committee’s latest increase of 0.75 baht a litre in all fuel prices reduced the fund’s daily subsidy burden by 100–200 million baht, the ministry source said.

“During the Middle East war, the fund had to subsidise diesel by as much as 5–6 baht a litre, pushing outflows above 700 million baht a day, or more than 20 billion baht a month in deficits. Cutting support to around 2–3 baht a litre has reduced the burden to 300–400 million baht a day,” the ministry source said.

Reducing fuel subsidies is an immediate option, the ministry source said. Falling world oil prices could allow support to be reduced without changing pump prices, while rising international prices could push domestic prices higher. The Energy Ministry would try to limit the impact on consumers.

Three oil fund rescue proposals await approval

Three proposals to stabilise the Oil Fuel Fund and support domestic fuel prices await policy direction from Energy Minister Akanat Promphan, the ministry source said. The fund is preparing the measures under its fuel crisis response plan and new strategic plan:

1. Increase refinery-gate discounts by 1–2 baht. The proposal would draw more on refining margins or secure further reductions in refinery-gate prices to ease the fund’s burden.

2. Cut diesel excise tax by at least 2 baht a litre. Diesel currently attracts excise tax of around 6 baht a litre. The ministry source argued that, alongside contributions from refineries, the government should accept an appropriate loss of revenue during the crisis, despite the Finance Ministry’s concerns about lower receipts.

3. Arrange fresh borrowing with a Finance Ministry guarantee. The proposal follows the use of 100 billion baht in guaranteed borrowing during the Russia–Ukraine war. The source argued that a government guarantee for further Oil Fuel Fund borrowing was unavoidable because the existing 20 billion baht borrowing facility was insufficient to support a deficit of around 100 billion baht.

“All these measures are awaiting policy direction and clarity from Energy Minister Akanat Promphan before a course is agreed and the implementation plan is formally approved,” the ministry source said.

Fiscal 2027 debt plan excludes oil fund loan guarantees

Thailand’s fiscal 2027 public debt management plan does not yet include arrangements for the Finance Ministry to guarantee Oil Fuel Fund borrowing.

The Cabinet approved the fiscal 2027 public debt management plan on September 29, covering 1.26 trillion baht in new borrowing, 1.9 trillion baht in existing debt management or restructuring, and 580 billion baht in debt repayments. 

Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas has identified three tools for managing energy prices: the Oil Fuel Fund, cooperation from refineries to use excess refining benefits to lower prices, and fuel excise tax reductions.

Ekniti said the government had not yet used excise tax cuts because lower revenue, combined with continued high spending, would still force it to borrow to cover the shortfall.

If excise relief becomes necessary, Ekniti said the government was considering targeting fuels such as E20 petrol and B20 diesel, which have higher ethanol and biodiesel content, so that Thai farmers benefit. Ethanol used in E20 is produced from sugar cane and cassava, while biodiesel is made from palm oil.

Higher Middle East exports ease oil prices as winter risks remain

Global crude prices have eased as Middle Eastern exports increased and Group of Seven (G7) countries released oil from emergency reserves.

Shipping data showed that the seven-day average of Middle Eastern crude exports reached 18.5 million barrels a day on October 1, compared with a pre-war average of 18 million barrels a day.

The Middle Eastern export figures covered shipments through the Strait of Hormuz and the Red Sea, port exports and ship-to-ship transfers in the Gulf of Oman. Exports continued despite attacks on vessels passing through the Strait of Hormuz.

The Energy Ministry expects international oil prices to remain volatile and elevated, even if they ease in the period ahead. The ministry is watching the approach of winter over the next month, when energy demand has historically increased and put upward pressure on oil prices.

The Energy Ministry also identified Middle Eastern geopolitical tensions, particularly US policy and measures towards Iran, as a major risk. In its assessment of the global economy, the ministry expected China to focus primarily on stimulating domestic activity.

Energy prices help push September inflation to 2.82%

Nantapong Chiralerspong, director-general of the Commerce Ministry’s Trade Policy and Strategy Office (TPSO), said Thailand’s headline inflation reached 2.82% year on year in September 2026, driven in large part by domestic fuel prices remaining above year-earlier levels. The figures are set out in the office’s September inflation release. 

Nantapong linked elevated fuel prices to the prolonged Middle East conflict. Higher production costs also pushed up prepared-food prices, while fresh food, including eggs, chicken and vegetables, became more expensive.

Thailand’s average inflation rate for January–September 2026 was 1.54% compared with the same period in 2025, according to the TPSO.

The TPSO narrowed its 2026 headline inflation forecast to 1.8–2.2% from 1.5–2.5%, keeping the midpoint at 2.0%, Nantapong said. Energy prices remained elevated because of geopolitical conflict, with the energy category contributing 1.85 percentage points, or more than 60%, of September’s inflation.

The TPSO identified further upward pressures for the rest of the year from geopolitical tensions affecting fuel prices, higher costs feeding into fresh and prepared food, and increased travel expenses. Weather-related effects on agricultural output and demand for fresh vegetables during the Vegetarian Festival could also support prices.

The TPSO expects electricity charges and personal-care product prices to provide downward pressure on inflation as both trend lower.

Source: Bangkokbiznews