Authorities ordered to closely watch potential oil and LPG price hikes
Prime Minister Srettha Thavisin is closely monitoring the situation in the Middle East, particularly the escalating tensions between Iran and Israel, and has instructed agencies involved in foreign affairs, security, and the economy to report any significant changes and potential impacts on Thailand.
For his part, Deputy Prime Minister and Minister of Energy Piraphan Salirathavibhaga has instructed his staff to closely monitor the situation and ordered the ministry’s permanent secretary Prasert Sinsukprasert to anticipate potential impacts and devise energy-related response strategies.
The National Economic and Social Development Council (NESDC) notes that the current situation between Iran and Israel does not show signs of escalating into severe conflict but points out that it once again underlines the uncertainty of geopolitical disputes, which is one of the key governance issues in managing the economy in 2024.
NESDC conducted an assessment of the Israel-Hamas conflict at the end of 2023 focusing on the impact of rising energy prices, which could indirectly affect the Thai economy through oil and LPG prices.
If the conflict escalates or is further prolonged, continuous upward adjustments in crude oil prices may occur. LPG prices could also rise soon. This would have a knock-on effect on the financial status of the oil fund, which is being used to support LPG prices and continues to incur massive debt, thus limiting the capacity to maintain LPG prices and leading to increased operational constraints. A rise in LPG prices would significantly impact the transportation and household sectors.
Kriangkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), stated that the ongoing situation comes as little surprise following a suspected Israeli air strike on the Iranian embassy compound in Damascus.
Therefore, the government must prepare by:
- Developing risk management plans for energy imports, particularly oil
- Monitoring the tourism sector closely even as it shows signs of recovery. The closure of airspace in several countries might impact confidence. Thailand's economy, which has blossomed during Songkran with a significant influx of tourists. Continued vigilance is crucial, and exploring new markets unaffected by such conflicts may be necessary.
- Exploring opportunities for food exports which transit through the Middle East.
