BANGKOK, Thailand – Thailand’s Oil Fuel Fund is nearing 100 billion baht in accumulated liabilities, but the Energy Ministry says it will not borrow money for now, maintaining that the fund can still manage the burden as it works to cushion consumers from volatile global oil prices.
Energy Ministry spokesman Pongpol Yodmuangcharoen said the fund’s liabilities had risen from around 65 billion baht on April 7 to approximately 98 billion baht, with the total expected to reach 100 billion baht during the week.
The fund was deployed heavily after the Middle East conflict erupted in late February, pushing energy prices into sharp swings. At the height of the crisis, daily subsidies reached 1 billion to 2 billion baht. By October 7, the fund was providing about 316 million baht a day, including 289 million baht for oil and 27 million baht for liquefied petroleum gas.
Diesel subsidies currently stand at around 2 baht per litre. The objective is to prevent domestic retail prices from immediately reflecting the full impact of global market movements, which could place sudden pressure on households and businesses.
Pongpol said the fund had weathered an even larger crisis in 2022 following Russia’s invasion of Ukraine, when its liabilities reached approximately 130 billion baht. As energy prices eased, the fund gradually recovered money through adjustments to retail fuel prices.
The principle, he explained, is to soften price increases during periods of high costs and gradually recover the subsidy when market conditions improve. The decision to borrow therefore depends on more than the size of the accumulated liabilities, with cash flow, incoming revenue, future subsidy requirements and the duration of the crisis also taken into account.
Five measures to manage energy costs
The Energy Ministry is relying on several measures to reduce pressure on the fund and limit the impact of energy prices.
One option is to recover excess refining margins. The ministry has already implemented this measure seven times, collecting approximately 28 billion baht. A possible eighth round is under consideration, with officials able to assess actual market prices before the end of October to determine whether action may be warranted in November.
Refining margins normally stand at around US$15–20 per barrel, according to the report. Higher margins may prompt an assessment of whether excess returns could be used to ease the fund’s burden.
Tax measures are another option, including proposals involving B20 biodiesel and E20 gasohol. These require consideration by the Finance Ministry, particularly the effect on government tax revenue.
The government is also seeking to diversify energy supplies by exploring petroleum resources in the Gulf of Thailand and the Andaman Sea, expanding crude oil sourcing options and supporting biofuels produced from palm oil, cassava and sugar cane.
A separate energy price crisis management plan establishes conditions for possible intervention. These include diesel or gasoline prices exceeding 30 baht per litre, global oil price swings of more than US$10 per barrel in a week, domestic fuel price changes exceeding 2 baht per litre in a week, or a risk that domestic supplies will not meet demand.
Borrowing remains a last resort
Pongchai Jirakunpaisan, director of policy and planning at the Oil Fuel Fund Office, said borrowing would not eliminate the fund’s liabilities. Instead, it would provide money for current support while creating future repayment obligations and interest costs.
If a prolonged crisis forced the fund to borrow repeatedly, the debt burden could grow further. Borrowing would also have implications for public debt, ultimately leaving the public to bear the cost of repayment, he said.
Even if liabilities were to rise to 150 billion baht, that figure alone would not automatically trigger borrowing. Officials would first assess the fund’s financial position, cash flow, oil price outlook, expected revenue and the likely duration of the crisis.
If borrowing becomes necessary, the Oil Fuel Fund Office would prepare a proposal for the Oil Fuel Fund Management Committee before submitting it to the Cabinet. The proposal would need a clear debt management plan and an exit strategy.
Global oil prices remain uncertain
The ministry expects energy prices to remain exposed to risks, particularly as demand typically increases during the northern hemisphere’s winter and geopolitical uncertainties persist.
Oil prices surged during March and April, with diesel prices reportedly reaching US$300 per barrel, before easing between May and July and becoming volatile again from August.
The challenge for the government is to continue cushioning consumers and businesses from sharp price increases while restoring the fund’s financial position, without transferring its liabilities into a larger public debt burden.
