BANGKOK, THAILAND – Thailand activated a phased energy emergency plan to stabilize supplies and prices as tensions in the Middle East pushed global oil and gas markets higher.
Hormuz crisis drives markets higher
Escalating confrontation between Iran, Israel and the United States disrupted shipping through the Strait of Hormuz, described as the world’s most important oil chokepoint. In Asia, the LNG spot price on 4 March rose to 25.40 US dollars per MMBtu, a three-year high, while Brent crude climbed above 81 US dollars per barrel.
The Thai government said more than 90 days of strategic reserves, a targeted diesel price cap and diversified import sources were intended to cushion the impact of the price spike. Officials framed the measures as a graduated response that could be tightened if the regional security situation worsened.
Cabinet crisis meeting orders new supply and price tools
On 4 March, Deputy Prime Minister and Finance Minister Ekniti Nitithanpraphas chaired a special meeting on energy security and gave the Energy Ministry three specific tasks. First, it was instructed to immediately identify new import sources outside the affected regions and report to the prime minister within one week.
Second, the Energy Ministry was ordered to work with the Finance Ministry on measures to dampen domestic prices, explicitly including tax instruments. Third, together with the Energy Regulatory Commission (ERC), it was told to secure additional gas supplies, steer the fuel mix for power plants and examine a new supply contract with Malaysia.
Power supply to lean on regional gas flows
To safeguard electricity generation, the government aimed to accelerate gas production in the Gulf of Thailand, via the Myanmar pipeline and from the Thai-Malaysia Joint Development Area (JDA). The Energy Ministry signalled its readiness to intervene in the market if needed.
“We are ready to intervene immediately if prices or margins show unusual movements.”
said the Energy Ministry, outlining its market oversight stance.
Officials indicated that adjusting the fuel mix for power plants would be part of the response, depending on how long elevated LNG prices persisted. The JDA and regional pipelines were presented as key buffers against potential bottlenecks linked to Hormuz.
Over 90 days of reserves, limited exposure to Hormuz
Deputy Prime Minister and Transport Minister Phiphat Ratchakitprakarn sought to calm debate over allegedly tight stock levels and corrected a previously circulating figure. According to him, Thailand held strategic reserves for more than 90 days, with only around half of its oil imports transported through the Strait of Hormuz.
He said no physical supply shortage had been reported so far, given that roughly 50 percent of imports came via other routes. The government presented this diversification as a key reason it did not yet see an acute supply emergency despite the geopolitical tensions.
Diesel capped at 30 baht as Oil Fuel Fund steps in
The main instrument against rising fuel costs was the Oil Fuel Fund, which stood net at 2.459 billion baht. It was currently subsidising diesel by 3.51 baht per litre.
This support kept the retail diesel price within the fixed band of 30 baht per litre. Authorities said this was intended to restrain transport costs, food prices and overall inflation.
Exit strategy in steps if the cap breaks
Officials assessed that, at current global prices of around 115 US dollars per barrel for diesel, the fund could maintain the 30-baht cap for at least one month without putting severe pressure on its finances. Beyond that point, a gradual exit strategy was planned.
If the cap had to be lifted, authorities foresaw stepwise increases of 50 satang to 1 baht per litre. The first stages would move the diesel price to 33 and then 35 baht per litre.
Worst case: 150-dollar oil triggers tax cuts
If crude oil rose to between 120 and 130 US dollars per barrel, the government planned to cut the diesel excise tax, mirroring measures taken during the crisis around the Ukraine war. At that time, relief of one to five baht per litre had been granted.
According to the authorities, those earlier cuts cost the state a total of about 100 billion baht. In a scenario of 150 to 170 US dollars per barrel, tax reductions and Oil Fuel Fund support would run in parallel, combining fiscal and off-budget tools.
LPG and electricity tariffs face pressure
For liquefied petroleum gas used for cooking, the government aimed to keep prices stable until the end of March, even though the LPG sub-account of the fund was more than 37.854 billion baht in the red. Officials portrayed this as part of the social protection package alongside diesel.
Electricity pricing was described as more sensitive, because the ERC would set tariffs for May to August by the end of March. Higher LNG spot prices, which had recently risen from about 10 to 14–15 US dollars per MMBtu, would flow into the calculation.
Excess earnings of the three state-owned power utilities, described as being in the “tens of billions of baht” by the end of 2025, were considered a buffer. These surpluses were expected to help absorb some of the fuel cost impact on consumers in the coming tariff round.