Oil : the weak point of thai economy

When he was Prime Minister, Thaksin decided to heavily subsidize the gasoline market.

The idea was to offer a “cushion” to the thai voters/drivers, as soon as 2004, when the price of oil started to surge on the world market . It continued in 2005, for an obvious -political- reason : the general elections…

That was part of the Thaksinomics.

This policy leaded to a debt of 100 billions THB (State Oil Fund). But the thai drivers were happy… Now they have to pay back. There is a premium on every liter at the pump, to payback the fund.

This shows the weakness of the Kingdom related to energy and especially gasoline.

Any further hike of oil prices on the world market could lead to a recession. Thais thought, for too long, that gasoline was granted. The party is over.

Right now a liter cost 29 to 30 THB. 2 years ago it was less than 20 THB.

The point to understand is on the chart 2. An individual in a european country pays already much more for his gasoline (because of heavy taxes). But he can cope with further hikes, in regard of his income.

On the contrary, thais are… naked. Any further hike would be a full blow, related to the average income. Meanwhile, the thai authorities would have no means to subsidize gasoline.

Therefore, the situation is much more dangerous for Thais than for Europeans.

It’s just a matter of time before we will see the streets and the highways of Bangkok… cleared of traffic ! Mad Max Scenarii ? Yes. But a likely one.

Gasoline Prices ($/gal)
Prices of a short gallon of gasoline in US$ around the World. Source: AA Motoring Trust via USAToday and Wikipedia. Click to enlarge.


Prices of gasoline as percentage of daily GDP
Cost of a short gallon of gasoline as percentage of daily GDP. Click to enlarge.


Some other graphics (from Bangkok Post, Energy : Reform in the pipeline)


The oil dependance


Price structure comparison and Prices since 2003 (in THB)


4 Responses to “Oil : the weak point of thai economy”

  1. 1 patiwat 21 June 2007 at 8:18 pm

    I doubt that we’ll see a significant reduction in street and highway traffic due to rising oil prices any time soon. In Thailand, as in most countries, oil price has very little impact on oil consumption. You can’t exactly tell people not to go to work or not to send their goods to market, especially if those people are for the most part poor and economize to the bone to begin with. Likewise, it’s difficult to get car owners or bus companies to convert from gas/diesel to NGV or biodiesel over night. And that’s even assuming that the junta is willing to support NGV or gasohol/biodiesel development, which it isn’t.

    Rising energy prices will hurt the Thai economy, especially the poorest of the poor. And the junta’s answer to all this? Nukes. The government is pitching nuclear power as cheaper than coal, better for human rights than imported hydropower from Myanmar, and cleaner than Thailand’s current 70% reliance on clean-burning natural gas.

    If you want to find some planning documents to figure out what the King’s government is thinking, I suggest you petition them, because the documents were removed from the Ministry of Energy’s website prior to the first public hearing. The public hearing itself was held in an army compound surrounded by hundreds of soldiers.

  2. 2 paperback 10 December 2008 at 9:18 am

    Just testing italics

    (congratulations) 😉

  1. 1 Oil, transports : +8 % would not make a big impact… ? « Thailand Crisis Trackback on 21 September 2007 at 1:27 am
  2. 2 Oil : more on the weak point of Thailand « Thailand Crisis Trackback on 17 October 2007 at 8:29 am

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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.

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