BANGKOK, THAILAND – The closure of the Strait of Hormuz amid renewed war risks in the Middle East raised alarms in Thailand, which relied heavily on oil imports and had already lost 178.1 billion baht in diesel tax revenue between 2022 and 2024.
Hormuz shut – why Thailand felt the impact immediately
The latest escalation between the United States and Israel on one side and Iran on the other, along with the closure of the Strait of Hormuz, increased uncertainty on global commodity markets. For Thailand, any disruption to this route meant a direct risk to the transport, availability and price of crude oil.
These risks carried potential consequences for inflation and for production and living costs across the country. The situation revived concerns over how a new oil price shock could reverberate through the wider economy.
Looking back to 2022 – when the Ukraine war drove oil higher
At the beginning of 2022, the war between Russia and Ukraine had already pushed energy prices up worldwide, with Dubai and West Texas crude trading at around 90 US dollars per barrel. Between May and July 2022, the situation worsened.
During that period, Dubai crude averaged 104 US dollars, while West Texas Intermediate fluctuated between 101 and 105 US dollars. These levels put significant strain on energy-importing countries such as Thailand.
Diesel at the pump – how Bangkok built its price cap
As pressure on the Oil Fuel Fund increased, the cabinet turned to a traditional tool: cutting the diesel excise tax. Between 2022 and 2023, the government adopted eight measures to curb pump prices.
These steps aimed to prevent a broader economic domino effect triggered by rising fuel costs. They reflected a policy choice to shield consumers and businesses from the full impact of global price spikes.
Eight cabinet decisions – the scorecard on tax cuts
The first move came on 15 February 2022, when the cabinet approved a reduction of 3 baht per litre for three months. Later, several extensions followed with cuts of 5 baht per litre, stretching through 2022 and into spring 2023.
Under later prime minister Srettha Thavisin, another cut of 2.50 baht per litre for three months was introduced on 13 September 2023. According to the report, this measure alone resulted in an additional 15 billion baht in lost tax revenue.
178.1 billion baht lost – and a fund deep in the red
Altogether, the tax measures from 2022 to 2023, plus a further cut of 1 baht per litre at the beginning of 2024, led to 178.1 billion baht in foregone tax revenue. At the same time, the Oil Fuel Fund fell sharply into negative territory.
Its debt burden temporarily exceeded 130 billion baht in mid‑2022, according to the account. In response, the government approved a credit line of up to 150 billion baht, guaranteed by the Ministry of Finance, to keep the fund afloat.
New Middle East war – the next stress test for the government
The current conflict centred in one of the world’s most important energy‑exporting regions carried the potential to trigger an even more severe energy crisis than the turmoil that followed the start of the Ukraine war. For the Thai government, this raised a familiar but sharper dilemma.
Once again, the key question was how to cushion an oil price shock without pushing the state budget and the Oil Fuel Fund into another costly imbalance. The answer would likely shape Thailand’s economic resilience in the face of renewed global energy volatility.