Thai economists have expressed concern that an escalation of the Israeli-Palestinian conflict will impact global oil prices and may push crude oil up to US$95 per barrel, which will further deplete the oil fuel fund.
Praipol Koomsup, former dean of the Faculty of Economics at Thammasat University, said that, if the war between Israel and Hamas escalates to involve the United States and Iran, the energy supply chain, including oil transport routes and oil producers in the region will be hard hit, driving up prices, even though Israel is not a major oil producer.
He said that the oil fuel fund, currently running about 68 billion baht in the red, may fall further to about 130 billion baht, if the government continues to subsidise the domestic prices of diesel and liquefied petroleum gas (LPG), estimated at about 400 million baht a day.
He recommended that Thai consumers now start economising on the use of energy voluntarily, instead of waiting for the government to come up with energy conservation measures.
Phiphat Luengnaruemitchai, chief economist at the Kiatnakin Phatra financial group, says that the impacts of the war in Israel, as far as Thailand is concerned, will be limited because Israel is not a major market for Thailand and Thai exports to Israel are estimated at about US$800 per annum.
He said, if the war escalates and drags on, global oil prices will certainly go up, which will directly affect Thailand. Most of the oil consumed locally is imported from various sources, including the Middle East.
He noted, however, that the influence of OPEC over global prices is no longer as strong as it was, because there are other major oil exporters, including the United States.
Energy Permanent Secretary Prasert Sinsukprasert said the Energy Ministry has mapped out a contingency plan to cope with oil price fluctuations in the wake of the Israeli-Hamas conflict, adding that such impacts will be limited.
The war premium on oil prices may increase, but for the short-term only, like the war between Russia and Ukraine.
The contingency measures adopted by the Ministry of Energy include an increase of crude oil reserves to up to 70 days, or 3.91 billion litres already in domestic storage, and an additional 1.637 billion litres en route to Thailand. There are also reserves of 2.18 billion litres of finished oil products, which can last for two months, and LPG reserves for 21 days.
The Energy Ministry will try to negotiate with the Excise Department to extend further the 2.50 baht/litre excise tax level for diesel, which is due to expire on December 31st.
