BANGKOK, THAILAND – Rising oil prices linked to the Middle East conflict put Thailand under pressure, but the Finance Ministry treated a cut in oil excise tax only as a last resort.
Government seeks shield against expensive energy
According to sources close to the Finance Ministry, the government prepared measures to cushion households and businesses from higher energy costs. At the centre stood the Oil Fuel Fund as the key tool to smooth price spikes and calm the market.
Officials focused first on using this fund rather than immediately changing tax policy. The approach aimed to buy time while monitoring global oil markets and domestic fiscal pressures.
Tax cut seen only as ‘last resort’
A reduction in oil excise tax was explicitly not considered the first option in Bangkok, but rather an emergency measure in case of further escalation. Behind this caution were, according to a ministry source, two concerns for economic stability: limited space in the state budget and potentially sharp revenue losses.
The government therefore sought to avoid simultaneous measures that could strain finances on multiple fronts. Cutting fuel taxes while supporting prices through the fund was seen as an especially risky combination for the national balance sheet.
Debt level tightens room below fiscal ceiling
Public debt stood at around 66% of GDP, while the formal fiscal discipline ceiling was set at 70%. At the same time, the Oil Fuel Fund came under pressure from diesel subsidies, and any further state‑guaranteed emergency borrowing would immediately be counted as public debt.
Although the fund still had limited borrowing capacity, every additional financing with a Finance Ministry guarantee could push overall debt dangerously close to the 70% mark. For this reason, the government did not want to open what was described as a “second front” by also cutting fuel taxes and further tightening the budget.
Oil fund under strain – new guarantees add to debt
The Oil Fuel Fund was described as wobbling under the burden of diesel support, even though some credit room remained. Any new state guarantee for the fund, however, would be booked directly as sovereign debt and intensify pressure on fiscal indicators.
This risk limited how far authorities were willing to use the fund as a shock absorber. It also reinforced the view that structural steps, including possible price adjustments and savings, had to accompany any direct financial support.
Multi-billion baht risk for the state budget
Oil and petroleum taxes formed a key pillar of revenue for the Excise Department, which set a target of 578.2 billion baht for fiscal year 2026. A significant share of this sum depended directly on oil products, meaning a tax cut would be not only popular but also costly for the state.
Officials weighed the short-term relief for motorists against the long-term hole in revenue. The assessment pointed to a substantial multi‑billion baht risk for the treasury if broad fuel tax reductions were revived.
Lessons from Ukraine war – nine diesel tax cuts
During the Russia‑Ukraine war, Thailand approved nine consecutive cuts to diesel excise tax between 2022 and 2024. According to Finance Ministry figures, this cost the fiscal authority more than 178.1 billion baht in forgone revenue.
At the same time, the Oil Fuel Fund was heavily burdened and needed large loans to remain liquid. These experiences shaped current caution about repeating expansive relief packages in the face of new external shocks.
Diesel price may rise after cap expires
As a parallel step, the government examined an adjustment of the diesel price structure to reduce pressure on the fund. After the end of the current 15‑day price cap, the diesel price could gradually rise from 29.94 baht per litre to about 31.94 baht per litre.
The phased increase was designed to soften the impact on consumers while restoring some financial stability to the Oil Fuel Fund. Authorities framed the move as part of a broader balancing act between affordability and fiscal resilience.
Savings rules for authorities – air-con at 26 to 27 degrees
The government also advanced stricter energy‑saving rules in the public sector, including air‑conditioning settings at 26–27°C. Additional measures included cutting unnecessary electricity use in offices, taking stairs instead of elevators for short distances, using less paper and holding more online meetings.
Where suitable, work‑from‑home arrangements were encouraged to reduce commuting and office energy consumption. These steps were intended to set an example for the wider economy and to lower state energy bills.
Citizens and businesses urged to save fuel – coercive steps possible
Authorities emphasised fuel‑saving actions such as regular vehicle maintenance, moderate driving speeds, car‑pooling and better route planning. The message targeted both private motorists and corporate fleets.
If the situation worsened, further mandatory measures were on the table, such as dimming illuminated advertising signs after 10 p.m. and shortening opening hours of petrol stations, with exceptions on major highways. These potential steps underlined how seriously the government viewed the combined shock of global oil prices and domestic fiscal limits.