Ekniti says Thailand will end blanket oil price subsidies

Ekniti says Thailand can no longer maintain blanket oil subsidies

Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas said on Saturday that Thailand had decided to end blanket oil price subsidies, warning that allowing the Oil Fuel Fund to absorb unlimited losses could trigger a wider economic crisis similar to the 1997 Tom Yam Kung crisis.

Speaking at the Meet the Press event at Government House, Ekniti said most countries had chosen not to resist market realities and had allowed oil prices to move in line with the market. Thailand, however, had not left prices entirely to market forces, instead using the Oil Fuel Fund to stabilise prices as much as possible and shield the public from the full impact of soaring global oil prices.

He said this was why the government had initially provided full subsidies before gradually scaling them back.

Unlimited subsidies could trigger a wider crisis

Ekniti said the government could not continue subsidising oil prices without limit, because doing so would expose the Oil Fuel Fund to mounting losses and create wider financial risks.

“If we did not reduce the subsidies, the Oil Fuel Fund would continue to incur unlimited losses, which could trigger an economic crisis,” he said.

He warned that Thailand could face consequences similar to the 1997 economic crisis, when authorities intervened to stop the baht from moving in line with market mechanisms and the country lost almost all of its international reserves, causing widespread hardship.

“We cannot allow such a situation to happen again,” he said. “That is why we have had to make decisions and manage the situation using the tools available, in order to prevent one crisis from triggering another.”

Thailand still keeps some support in place

Even with the shift in policy, Ekniti said Thailand was still subsidising diesel prices, unlike several other Asean countries that had already allowed prices to float fully.

As a result, he said, Thai fuel prices remained lower than those in neighbouring countries.

“In my lifetime, I have never seen Thai fuel prices lower than those in Malaysia,” he said, underscoring that Thailand was still providing meaningful support despite ending blanket subsidies.

Government urges all sectors to adjust

Ekniti said the prolonged crisis meant all sectors now had to adapt.

He said the government would cut unnecessary spending, while the public and private sectors would also need to work together because no one yet knew how long the crisis would last.

“We have to be prepared,” he said.

Government seeks to avoid ‘a crisis on top of a crisis’

Ekniti said the government was still using every available economic tool to cushion the blow from the global energy shock and stop it from spreading across the wider economy.

He said the key challenge was to balance short-term support for the public with long-term economic stability, so that Thailand did not end up facing “a crisis on top of a crisis”.

Measures target costs across the economy

He said the government had instructed relevant agencies to contain costs on several fronts to prevent energy pressures from feeding into broader inflation.

Key measures include:

• The Commerce Ministry monitoring goods prices to prevent unjustified increases
• The Transport Ministry taking steps to hold transport costs steady
• The public sector cutting unnecessary spending and suspending overseas travel
• Promotion of work from home to reduce energy use

Ekniti said the goal was to break the cost cycle and stop energy pressures from spreading through the entire economy.

More targeted aid planned for vulnerable groups

For the next phase, Ekniti said the Finance Ministry was preparing more targeted support, especially for low-income earners who have been hit hardest by higher living costs.

He said he would convene a meeting of the State Welfare Committee to consider increasing assistance under the state welfare scheme, along with other measures to ease day-to-day expenses.

He added that, because the budget came from taxpayers, it had to be used in the most targeted and cost-effective way possible, with priority given to vulnerable groups.

Background: Iran war deepens global energy crisis

Ekniti said the global energy shock had been driven by the prolonged Iran war and disruption to the Strait of Hormuz, a critical oil shipping route, which had pushed up energy prices and fed through to production costs, transport costs and household living expenses.

He said Thailand’s response was aimed at protecting the public from the immediate impact while avoiding long-term structural damage to the economy.