The fund of about 30 billion baht ($936.9 million) will absorb 50 percent of any increase in retail prices, Energy Minister Siri Jirapongphan told reporters.

"If retail oil prices rise 1 baht, the fund will help 0.50 baht," Siri said.

"This will help ease the impact from oil prices, which could rise to over $80 per barrel," he added.

The government aims to keep the domestic retail diesel price at 30 baht per litre, Siri said, as the price had risen by 3 baht per litre to about 29.8 baht over the past two months.

The subsidy plan will need approval from the Energy Policy and Planning Office, which will meet this week.