Anutin: oil prices may rise again; Finance Ministry warns excise cuts could cost 14bn baht a month

Prime Minister Anutin Charnvirakul warned that oil prices may rise again after the closure of the Strait of Hormuz, while the Finance Ministry cautioned that cutting fuel excise taxes could undermine fiscal discipline—raising fears of a repeat of the 2022 revenue shock.

Speaking about the 6-baht-per-litre increase across all fuel types, Anutin said prices were moving in line with market mechanisms. He said the government’s priority is to ensure domestic fuel security. “If we subsidise too much, the budget used for it is depleted every day,” he said, adding that when domestic prices are set below market levels, the risk of leakage to neighbouring countries and hoarding increases. He said the aim is to keep prices aligned with global levels, noting that all countries must cope with higher oil prices. Within ASEAN, he said, Thailand remains among the countries with comparatively lower prices, and even some neighbouring producers still have higher pump prices than Thailand.

Asked whether prices could rise further, Anutin said it is possible because the Middle East situation remains volatile. However, he stressed that Thailand has ensured it will not run out of fuel and can still secure crude supplies. He said a recent meeting instructed PTT to source refined products—specifically diesel volumes that are sold to Laos—from overseas and sell them directly to Laos, while keeping PTT-refined diesel within Thailand. He said this would boost public confidence. Thailand previously exported about 5 million litres per day to Laos without problems, he said, but the adjustment is intended to strengthen confidence as the situation could drag on.

Anutin added that refineries not under government supervision would also be approached to import diesel from overseas for export to Laos. He said pricing discussions have already taken place to ensure it is workable, stressing that the goal is not excessive profit but keeping domestically refined fuel in Thailand as much as possible to increase available diesel at home.

Finance Ministry modelling on excise cuts

A Finance Ministry source said that after the Cabinet approved, in principle, allowing the ministry to consider lowering fuel excise taxes as a mechanism to reduce domestic retail prices and ease pressure on the Oil Fuel Fund, the Excise Department has completed a study and prepared modelling scenarios for potential tax cuts for policymakers to consider.

Diesel excise is currently 7.44 baht per litre, while petrol excise ranges from 5.85 to 7.50 baht per litre, varying by the proportion of biodiesel blending.

Preliminary estimates show that for every 1 baht per litre excise cut, government revenue would fall significantly: diesel excise revenue would decline by 2 billion baht per month, while petrol excise would reduce revenue by 800 million baht per month. Cutting both fuels by 1 baht at the same time would therefore cost the state about 2.8 billion baht per month.

The Excise Department also produced step-by-step scenarios:

• Scenario 1: Cut excise on both fuels by 3 baht per litre — revenue loss of 8.4 billion baht per month. If cutting diesel only, the loss would be 6 billion baht per month.
• Scenario 2: Cut excise on both fuels by 5 baht per litre (the level used during the Russia–Ukraine energy shock) — revenue loss of 14 billion baht per month. If cutting diesel only, the impact would be 10 billion baht per month.
• Scenario 3: Cut diesel only by 7 baht per litre — revenue loss of 14 billion baht per month.

A senior source warned that relying on excise cuts is concerning and could create long-term fiscal stability risks because lost tax revenue cannot be collected retroactively. This contrasts with the Oil Fuel Fund mechanism, which can later rebuild liquidity by collecting contributions when global oil prices fall.

The source cited lessons from the 2022 energy crisis, when cutting fuel taxes to ease living costs resulted in a heavy hit to fiscal revenue, with losses estimated at more than 150-160 billion baht per year.

“This year is even more worrying because several global credit rating agencies are closely watching Thailand’s fiscal position and fiscal discipline. If the government repeatedly pursues policies that erode core revenues, it could ultimately raise the risk of a sovereign credit rating downgrade,” the source said.