Thailand’s oil fund crisis: decades of price controls leave lasting public burden

Thailand’s energy crisis in 2026 is not the first time the country has been forced to grapple with fuel prices rising beyond what ordinary people can bear. Each time such a crisis has erupted, Thai governments have turned to the Oil Fuel Fund as an emergency tool to contain the damage. But the price of that decision has often been a mountain of debt, eventually passed on to the public in the long run.

A review of the figures across successive administrations — from the government of Thaksin Shinawatra, which faced soaring oil prices during the Iraq war, to the government of Prayut Chan-o-cha, which had to deal with the fallout from the Russia-Ukraine war — shows the same pattern repeated again and again. The Oil Fuel Fund has been used to subsidise prices, accumulate debt, and then wait for world prices to fall so the money can be collected back to repay what was lost. This cycle has continued for more than 20 years, with no clear sign of ending easily.

The Oil Fuel Fund was created on a principle that appeared sensible: to provide a mechanism for stabilising domestic fuel prices. When global oil prices are low, a levy is collected on each litre of fuel sold in Thailand and paid into the fund as a reserve. When world prices surge, the fund releases money to subsidise the difference, sparing consumers from feeling the full impact immediately.

Although this principle looks sound on paper, the problem in practice has been the scale and duration of global oil price volatility over the past two decades. When governments decide to keep domestic prices below their real cost for too long, the fund is quickly depleted. Once the money runs out, the fund itself falls into debt.

The first major lesson came during the Thaksin administration. Between 2004 and 2005, Thailand faced its first serious experience of intense global oil price pressure. The main drivers were the war between the United States and Iraq, combined with political unrest in Venezuela, then one of the world’s major oil exporters. Global supply was tight and prices rose steadily.

Thaksin’s government decided to intervene aggressively through the Oil Fuel Fund, capping the price of benzene 95 at 16.99 baht per litre, benzene 91 at 16.19 baht per litre, and diesel at 14.59 baht per litre, even though world market prices were far higher.

Money flowed out of the fund more quickly than it could be collected. The fund eventually had to borrow from financial institutions to maintain liquidity, with total loans reaching 71 billion baht. Even that proved insufficient to keep prices suppressed indefinitely.

In July 2005, the government finally accepted reality and floated oil prices. Diesel jumped to 22.49 baht per litre, while benzene rose to 25.56 baht per litre. In total, Thaksin’s government spent 92.07 billion baht on fuel price subsidies, setting what was then the highest figure in the history of the Thai Oil Fuel Fund.

The lesson from that period was stark. Freezing prices in the short term may ease hardship, but if global oil prices stay high for an extended period, the fund loses its ability to cope. In the end, the public still faces a sharp and painful adjustment, often more sudden than if prices had been allowed to move earlier.

The fund entered a recovery phase during the administration of Abhisit Vejjajiva. After Thaksin left office and the country passed through several interim governments, global oil prices began to reverse. In December 2008, crude oil prices fell sharply, partly as a result of the global financial crisis, which caused energy demand to contract rapidly.

During Abhisit’s term, the Oil Fuel Fund was once again able to collect more money than it paid out because global oil prices remained low. Revenue collected from domestic fuel sales was sufficient to repay all outstanding debts from earlier governments, and the fund returned to a positive balance of 28.768 billion baht.

This was one of the few periods in its history when the Oil Fuel Fund was in a strong financial position. But the calm did not last.

When Yingluck Shinawatra took office in 2011, global crude prices became volatile once again, pushing the domestic diesel price above 40 baht per litre. Her government chose to temporarily reduce contributions into the fund for certain types of fuel, which was another form of indirect price support.

The result was that the fund slipped back into deficit, this time by more than 20 billion baht. Although it was not as severe as in the Thaksin era, it underlined the same recurring problem: pressure from global energy prices remained chronic, and the Oil Fuel Fund continued to be the main instrument automatically used by every government.

The situation changed again after the National Council for Peace and Order, led by General Prayut Chan-o-cha, came to power in 2014. Global energy conditions turned favourable, with crude oil prices declining continuously for more than five years. They fell even more sharply in 2019 and 2020 during the Covid-19 pandemic, when countries around the world imposed lockdowns and work-from-home measures, leading to a sudden collapse in oil demand.

During this period, the Thai government hardly needed to draw on the fund at all. On the contrary, the fund was able to accumulate more than 300 billion baht in reserves. It was a rare golden opportunity to build up a buffer against the next crisis, although how that reserve would later be used depended on government policy.

A turning point came at the end of 2021. As countries gradually eased lockdown measures and reopened their economies, global demand for energy rebounded rapidly. Oil supply, however, could not adjust quickly enough, pushing crude prices steadily higher.

The Oil Fuel Fund once again had to begin releasing money to subsidise prices. By late January 2022, its balance had already fallen into deficit by more than 10 billion baht, despite the large reserves accumulated earlier.

Then, in February 2022, the crisis was compounded when Russia invaded Ukraine. Crude prices surged sharply and violently, and the Oil Fuel Fund — already in deficit — was immediately forced to shoulder an even heavier burden.

The Prayut government decided to keep diesel prices below 30 baht per litre, using the Oil Fuel Fund as a buffer while global market prices remained far higher. Money drained from the fund continuously.

By April 2022, the government allowed diesel to rise to 32 baht per litre, but by then the fund’s deficit had already exceeded 50 billion baht. Prices were then allowed to edge up further, although they still remained below actual market costs.

By mid-June 2022, the fund’s deficit had exceeded 90 billion baht. During just three to four months in that period, the fund was spending around 20 billion baht a month in subsidies for both diesel and liquefied petroleum gas (LPG).

On June 19, 2022, the Oil Fuel Fund’s deficit reached 96.598 billion baht. Before the end of that month, it crossed the 100-billion-baht mark for the first time in history, breaking the previous record of 92.07 billion baht set under Thaksin.

But the story did not end there. Global oil prices remained volatile, and the fund still had to continue its role in keeping prices down. Eventually, the highest figure in Prayut’s era rose to 123.155 billion baht on December 25, 2022, including 79.042 billion baht used to subsidise oil prices and 44.113 billion baht for LPG.

That remains the highest figure ever recorded in the history of Thailand’s Oil Fuel Fund, and no government has yet exceeded it.

Even so, once world oil prices began to ease, the fund was eventually able to collect enough money to repay the oil-related portion of the debt in full by May 18, 2025, although the LPG side remained a continuing problem.

When Srettha Thavisin became prime minister on August 23, 2023, what his government inherited was not simply executive authority but a fund still deep in deficit. As of August 20, 2023, the Oil Fuel Fund stood at minus 53.087 billion baht, made up of 8.364 billion baht from oil subsidies and 44.723 billion baht from LPG.

Although this looked far lighter than the 123.155-billion-baht peak under Prayut, the challenge confronting Srettha’s government turned out to be heavier than expected. Global oil prices remained volatile, while political pressure to keep energy affordable for the public remained constant.

During just one year in office, the fund did not recover as hoped. Instead, its deficit deepened further. By the time Srettha left office on August 14, 2024, the fund’s position as of August 18, 2024 had deteriorated to minus 109.651 billion baht, including 62.063 billion baht from oil subsidies and 47.588 billion baht from LPG.

That meant the Oil Fuel Fund’s deficit had increased by more than 56 billion baht in only one year. It reflected the continued use of fuel price support and the failure to seriously tackle the LPG burden. Srettha’s administration passed that debt on to the next government in a worse condition than when it took office.

Paetongtarn Shinawatra became prime minister on August 16, 2024, inheriting a fund deficit of 109.651 billion baht from the previous administration, a figure close to the historic peak under Prayut.

However, over the next year, global oil prices began to ease from their highs. Combined with a policy approach that allowed fuel prices to better reflect real costs, this enabled the fund to steadily collect money and repay the oil-related debt.

By the time Paetongtarn left office on August 29, 2025, the Oil Fuel Fund’s position as of August 31, 2025 had improved dramatically, with the deficit reduced to just 22.982 billion baht. Significantly, the oil component had returned to a surplus of 19.960 billion baht, although the LPG component was still deeply negative at 42.942 billion baht.

Reducing the overall deficit from 109.651 billion baht to 22.982 billion baht within one year showed that when global prices move in a favourable direction, the fund is capable of recovering. Even so, the unresolved issue remained LPG subsidies, which had become an entrenched problem across successive governments and one that no administration had yet seriously dared to restructure.

Now, in 2026, a new round of crisis is building under the administration of Prime Minister Anutin Charnvirakul. The government has been hit by fresh pressure after geopolitical tensions in the Middle East escalated into a war involving Iran, sending global crude prices sharply higher once again. The Oil Fuel Fund, which had only just regained some breathing space, has once more been forced to shoulder price subsidies.

As of March 22, 2026, the fund was back in deficit at 28.109 billion baht. The oil portion was still in surplus at 9.302 billion baht, but the LPG portion remained deeply negative at 37.411 billion baht, underlining how the LPG subsidy problem has still not been seriously resolved despite repeated changes of government.

At the same time, daily subsidy levels in the domestic market have become alarmingly high. Ordinary high-speed diesel was being subsidised by 26.99 baht per litre as of March 24, 2026, up from 24.09 baht per litre the previous day alone. Gasohol 95 and 91 were being subsidised by 9.73 baht per litre, while gasohol E20 was receiving 12.85 baht per litre in support. These figures show how wide the gap has become between what consumers are paying and the real cost, with the fund carrying a heavy burden every single day.

There was, however, a brief short-term positive sign on March 24, 2026, when global oil prices fell by more than 5% after reports that the United States had sent Iran a plan to end the war for consideration. Brent crude dropped to 98.28 US dollars a barrel, while WTI stood at 87.68 dollars a barrel.

Even so, analysts remained cautious about becoming too optimistic. As long as the conflict in the Middle East is not genuinely resolved, supply risks will continue to hang over the market, and the Oil Fuel Fund must remain prepared for renewed pressure at any time.

Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas has made it clear that the government needs to allow fuel prices to reflect real costs, arguing that distorting the price mechanism would create inefficiencies in the economy and waste public resources unnecessarily. His position signals that the government does not intend to repeat the old policy path.

Instead of broad-based fuel subsidies, the new government plans to focus assistance specifically on groups that are genuinely hit hardest. These five groups are state welfare card holders, numbering about 13.4 million people; the transport and logistics sector, including public transport vehicles and trucks; farmers affected by rising fertiliser costs; fishing communities, which will be encouraged to use B20 diesel; and state contractors, who will receive adjustments through the K-factor mechanism, along with soft loan measures for the industrial sector.

This approach appears more rational than blanket subsidies. But the challenge lies in whether the government can deliver the support to the target groups in a timely and effective way, while also preventing leakages and duplicate claims.

Looking back over more than two decades, one pattern stands out clearly. Whenever governments face sharply rising global oil prices, they tend to make the same choice: keep domestic prices low to ease short-term pain, at the cost of accumulating debt in the Oil Fuel Fund. When global prices later fall, money is collected again until the debt is repaid, only for the cycle to begin all over again.

Under Thaksin, 92.07 billion baht was spent on subsidies, with an additional 71 billion baht borrowed before prices were finally floated. Under Yingluck, more than 20 billion baht was used for support. Under Prayut, the figure reached a new record of 123.155 billion baht.

What is important to remember is that whenever the Oil Fuel Fund falls tens of billions of baht into deficit, it is not merely an accounting number. It represents a liability that must later be repaid, either through higher fuel levies when world prices fall or through abrupt price increases when governments can no longer sustain the pressure. One way or another, consumers are ultimately the ones who bear the burden.

What makes the 2026 crisis different is that the government appears more explicit than in the past in insisting that it will not return to broad price suppression. If this approach can be implemented in practice, it may mark the first time in decades that Thailand breaks free from the vicious cycle of price controls, debt accumulation and eventual adjustment.

But if targeted assistance cannot be delivered quickly and effectively, political pressure may once again force the government back to the same old tool — just as has happened repeatedly throughout modern Thai history.