The domestic price of diesel is set to decrease to 34.5 baht a litre later this month, down from 34.94 per litre, following a decline in global crude oil prices.
The new retail price will take effect at 5am on Feb 15, said Wisak Watanasap, director of the state Oil Fuel Fund Office (Offo).
Global oil prices are expected to decline this year as the world economy decelerates. Oil supply will slightly exceed demand, but global oil prices still fluctuate and can go up at any time if supply is disrupted, according to analysts from national oil and gas conglomerate PTT Plc.
Last month, Singapore's reference price for diesel dropped to US$116.12 per barrel on average, from $135.53 in November last year.
The authorities no longer allocate money from the fund to subsidise the price of diesel, but the price remains low because the diesel excise tax of five baht has been waived and the waiver is valid until May 20.
"Despite the prolonged Russia-Ukraine war, we hope oil supply constraints will be eased in order to meet global demand. That will allow the government to resume excise tax collection," said Mr Wisak.
Offo currently collects 5.19 baht a litre from buyers to support the fund in order to settle debts incurred when it spent money from the fund to subsidise both diesel and liquefied petroleum gas (LPG) prices last year.
Energy authorities requested a 30-billion-baht loan to support the dwindling fund, which was running a loss of nearly 130 billion baht.
In 2022, Offo subsidised the diesel price at 14 baht a litre, costing the fund 20 billion baht a month.
The situation led PTT to allocate 3 billion baht to help the government support the fund.
The company operates oil refineries, with refined oil accounting for 77% of the country's total capacity.
According to Offo, the fund was 113 billion baht in the red as of Monday.
This amount was attributed to spending of 68.1 billion baht to subsidise diesel prices and 45.3 billion to subsidise LPG prices.
Ponchai Jirakunptsarn, chief of Offo's policy and strategy department, said officials will decide next month on whether to increase the LPG price by one baht per kilogramme, leading to a hike of the LPG price to 423 baht per 15kg cylinder, up from 408 baht per cylinder.
The market price of LPG is currently 470 baht per cylinder.