Malaysia: Malaysia and Thailand have adopted fundamentally different approaches to fuel subsidies, reflecting distinct policy priorities and strategies for managing consumer usage, as both countries strive to balance economic stability with social welfare.
According to BERNAMA News Agency, Malaysia's subsidy system is anchored by the Automatic Pricing Mechanism (APM), where retail fuel prices broadly track global benchmarks, with targeted subsidies applied to selected sectors to manage cost pressures.
Thailand, by contrast, relies on its Oil Fuel Fund to cushion domestic prices, allowing retail prices to move with the market while partially offsetting increases through subsidies drawn from the fund. Rystad Energy senior analyst Girish Sen said Thailand's recent diesel price reduction provided short-term logistics cost relief and a marginal improvement in regional competitiveness for freight-intensive export sectors, but should be seen as a temporary relief measure rather than a structural shift.
From April 11, Thailand reduced retail prices for most diesel and gasohol products by up to six baht per litre to ease transport costs and living expenses during the Songkran holiday. Girish noted the divergence in diesel prices between Malaysia and Thailand reflects fundamental differences in subsidy frameworks, highlighting that Thailand's universal price cap model operates differently, although it serves as an effective short-term cushion.
Girish explained that in scenarios of prolonged conflict, the central question for Thailand is the management of price adjustments before the fund's borrowing capacity is fully exhausted, to avoid a forced price increase when the borrowing capacity is depleted. Thailand has been using its Oil Fuel Fund, established in 1973, to stabilise fuel prices amid the ongoing United States-Iran conflict. This fund is financed through borrowings capped at 150 billion baht, compared with Malaysia's subsidy system, funded through government revenue.
Recently, Thailand's Energy Ministry stated that the country has oil supplies sufficient for about 110 days, while the Oil Fuel Fund recorded a deficit of 59.4 billion baht as of April 10, 2026. With the fund already in deficit, it is estimated to have only about two months of capacity left if global prices remain at current levels.
Girish said this suggests that while Thailand's diesel prices may be marginally lower than Malaysia's at present, the gap is unlikely to be sustained beyond the near term. He added that Malaysia's revenue-based model is more resilient in prolonged conflict scenarios, as it is budget-funded, citizen-targeted, and quota-controlled, allowing policymakers to manage exposure without accumulating structural debt. In contrast, Thailand's fund carries borrowings that need to be cleared, assuming crude stays within a specific price range.
Girish highlighted that the fund has historically relied on borrowing during periods of price volatility, with some episodes showing that debt alone was insufficient to sustain suppressed prices over time. Malaysia has moved towards a more targeted subsidy framework, allowing cost pressures to be managed more gradually while containing fiscal exposure. Malaysia initiated subsidy reforms during a period of relative price stability, while Thailand has largely been forced to absorb shocks before undertaking structural adjustments.
He concluded that Thailand's approach means the fund enters each new crisis already encumbered, with progressively less fiscal room to absorb further shocks.