Appeal for energy reforms as oil prices still fluctuate

Thailand dependent on imports

Global crude oil prices remain highly volatile due to geopolitical factors, underscoring the need for Thailand to urgently address its structural weaknesses, says Finance Minister Ekniti Nitithanprapas.

Speaking after oil prices rebounded following renewed strikes between the US and Iran, he said geopolitical uncertainty has intensified, pumping up oil prices again.

"We live in an increasingly volatile world. But regardless of whether oil prices rise or fall, one fact remains unchanged: the Thai economy has structural weaknesses," said Mr Ekniti. "Thailand relies heavily on imported oil, making the economy highly vulnerable to fluctuations in global oil prices."

He said any decline in oil prices is likely to be temporary. Therefore, Thailand must urgently reduce its dependence on imported oil.

The impact is reflected in inflation, which accelerated between January and March as oil prices climbed, reversing a period of contraction and increasing the cost of living for Thai households.

Thailand needs to accelerate efforts to expand the use of clean energy, such as solar power for electricity generation, increasing the blending ratio of palm oil in biodiesel, and raising the use of ethanol in gasoline, noted Mr Ekniti.

Kobsak Pootrakool, senior executive vice-president at Bangkok Bank (BBL), said global crude oil prices remain highly volatile amid tensions between Iran and the US.

If the situation eases and the sides reach an agreement, oil prices could fall back to their pre-conflict level of $65-70 per barrel, he said. However, the continued presence of US military forces in the Middle East and military exercises that signal readiness for further operations remain a risk to monitor, said Mr Kobsak.

The latest bout of oil price volatility differs from the early stages of the Russia-Ukraine war, he noted. This time, oil prices surged and retreated within just four months, whereas it took nearly a year for prices to fall back to around $80 per barrel after Russia's invasion.

Given the heightened uncertainty, Mr Kobsak said it remains difficult to forecast Thailand's economic outlook this year. BBL maintained its GDP growth forecast at 1.5-2%, below the Bank of Thailand's projection of slightly above 2% because of the uncertainty, preferring to wait to make a revision.

Regarding inflation, he said Thailand's rate could rise to 3-4%, depending on how long oil prices remain elevated. Although inflation may temporarily exceed the central bank's target range during periods of high oil prices, Mr Kobsak expects it to ease naturally once global oil prices stabilise.

In terms of monetary policy, he said the policy interest rate should remain at 1% to support the economy and maintain the baht at around 33 per US dollar, which helps to strengthen Thailand's export and tourism sectors, providing momentum for economic growth.