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Thai authorities plan for potential energy cost surge amid Israel-Iran conflict


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Thailand’s Ministry of Commerce has issued directives to state bodies to devise strategies to mitigate potential surges in energy costs in the event of an escalation in the Israel-Iran conflict.

 

The directive follows Iran’s missile and drone assault on Israel, a retaliatory move against Israel’s alleged attack on Iran’s consulate in Damascus earlier this month. This marked the first direct attack by Iran on Israel in a longstanding shadow conflict, typically characterised by Iran launching assaults on Israel via terror proxies.

 

In response to the escalating situation, Commerce Minister Phumtham Wechayachai announced that he had tasked the ministry, the International Trade Promotion Department, the Trade Policy and Strategy Office, and foreign commerce diplomats with assessing potential impacts on Thai trade.

 

Phumtham also called for diligent monitoring of activities in the Strait of Hormuz, a crucial maritime route for oil and natural gas exports for numerous Middle Eastern nations, including Saudi Arabia, the United Arab Emirates, Iran, Qatar, and Kuwait. The strait sees a daily traffic of around 21 million barrels of oil.

 

Should the conflict intensify to the point of disrupting this key trade route, the implications could be severe. The disruption could significantly hinder oil procurement, leading to hikes in transport costs and global energy prices. Phumtham stressed the need for state bodies to examine the potential negative outcomes of such scenarios and devise strategies to mitigate impacts on Thailand and its export sector.

 

The National Economic and Social Development Council previously expressed concerns that the Israel-Hamas conflict could impact the Thai economy via fuel and liquefied petroleum gas (LPG) prices should the situation worsen.

 

The assessment indicated that the country’s capacity to stabilise fuel prices seems to be diminishing, while LPG prices may continue to rise given the rapid depletion of the oil fuel fund, reported Bangkok Post.

 

by Alex Morgan

Picture courtesy of engin akyurt, Unsplash

 

Source: The Thaiger 2024-04-16

 

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https://www.bbc.com/news/business-68812949

 

Oil prices fell on Monday after Iran's reprisal attack on Israel over the weekend.

Brent crude - a key benchmark for oil prices internationally - was lower but still trading close to $90 a barrel.

Prices had already risen in expectation of action by Iran, with Brent crude nearing a six-month high last week.

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28 minutes ago, NoshowJones said:

Is it not more likely they will do a Makro and put western food prices up, ie tins of Ayam baked beans and tins of spam? Then blame foreign wars as an excuse.

For every dish you will have the can.

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5 hours ago, webfact said:

Thailand’s Ministry of Commerce has issued directives to state bodies to devise strategies to mitigate potential surges in energy costs in the event of an escalation in the Israel-Iran conflict.

Regardless of the Iran-Israel conflict, Thailand appears to have already "trapped" itself with higher energy costs. (Note that unless Iran begins sinking oil tankers from Saudi Arabia, United Arab Emerites and Libya in the Middle East. Otherwise imports from the USA and Malaysia should be secure.)

  • First by relying more on Russian oil exports given an advantageous currency conversion caused by UN sanctions against Russia and from pricing for what appears to remain neutral in Russia's invasion of Ukraine.
  • Second Thailand has begun actively purchasing spot crude shipments to feed anticipated higher domestic fuel demand driven by Thailand's strategy to turbocharge its tourism industry. www.spglobal.com Spot prices can be artificially affected significantly by public perception.

 

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13 minutes ago, Chalong circle said:

What about the salary ?

More about the tax than anything else, yesterday tax on diesel in UK was 50.18%, during covid tax was in the order  of 70%.

Tax on petrol is a separate calculation and yesterday about 2% higher than diesel.

https://www.racfoundation.org/data/percentage-uk-pump-price-which-is-tax-page#:~:text=Percentage of UK pump price which is tax&text=Fuel duty is currently levied,chart to see exact values.

 

Fuel tax in Thailand is less than 25% of that in UK.

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2 hours ago, NoshowJones said:

Is it not more likely they will do a Makro and put western food prices up, ie tins of Ayam baked beans and tins of spam? Then blame foreign wars as an excuse.

 

"Then blame foreign wars as an excuse." The last can to carry the blame for price hikes and delays in delivery was Covid-19.

 

Any prospective reductions in the price of imported wine will probably meet the same fate - despite the lowering of import taxes and duties.

Edited by sambum
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Thailand should be looking to Canada and USA for LNG supplies. LNG Canada is coming online soon, with 2 trains, overall plan is 6 or 8 trains. There are about another 3 LNG plants planned for west coast Canada. Massive pipeline to LNG Canada has been completed. Lots of natural gas, which can be processed and liquefied into LNG, in Canada and USA. Also, there is a huge LNG plant in Papa New Guinea, owned by Exxon. Lots of LNG available, and more coming online and available for export. If you need to import a critical resource, it's always important to diversify sources, plan ahead for supply disruptions, even if it costs more.

 

The new proposed plants  are looking for funding and partners. Original partners will control the cost of the LNG. Thailand could get it cheaper than buying it from an intermediary, if they invested.

 

Edited by Banana7
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Too bad Thailand doesn't have oil out in the Gulf  that it could harvest.

 

That's Sarcasm; should be an icon for it. (not sarcasm)

Edited by IAMHERE
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1 hour ago, Chalong circle said:

What about the salary ?

Agree it's all relative. Price to earnings. E.g. A Thai earning Thai min wage could never afford to live ( even go on holiday) In for example the uk. However a UK citizen could lead a comfortable life in Thailand on UK min wage , and can yes afford to come on holiday here

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13 hours ago, webfact said:

mitigate impacts on Thailand

Code word for the usual greedy people running the government to increase next months utility bills in "anticipation" that prices "may" go up due to mideast tensions.

 

 

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On 4/16/2024 at 2:08 PM, NoshowJones said:

Is it not more likely they will do a Makro and put western food prices up, ie tins of Ayam baked beans and tins of spam? Then blame foreign wars as an excuse.

Just check where YOUR Ayam baked beans are made!

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On 4/16/2024 at 3:40 PM, Chalong circle said:

What about the salary ?

No matter what your salary,or even if you're on unemployment benefit in UK everyone pays the same . Wine here is double the UK price 

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On 4/16/2024 at 4:28 PM, ronster said:

Seems any war or potential war is a good excuse for companies to charge more , even if it has no impact on goods etc  😒

The conflicts are headline news and easy for some to make assumptions, they may or may not have some impact.

The real reason for an upward trend in shipping costs comes from rerouting vessels.

https://www.bbc.com/future/article/20240119-red-sea-crisis-how-global-shipping-is-being-rerouted-out-of-danger

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39 minutes ago, Chongalulu said:

No matter what your salary,or even if you're on unemployment benefit in UK everyone pays the same . Wine here is double the UK price 

Your last statement is very generalised, if anything I would suggest domestic UK wine is very much the same price as Thai domestic wine.

What you really mean is imported wine is heavily taxed to protect the domestic market. Fuel is heavily taxed in the UK but not for the same reason.

We can live in hope that one day the Thai wine producers will become more efficient and prices fall, not holding my breath.

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On 4/18/2024 at 2:53 PM, sandyf said:

Your last statement is very generalised, if anything I would suggest domestic UK wine is very much the same price as Thai domestic wine.

What you really mean is imported wine is heavily taxed to protect the domestic market. Fuel is heavily taxed in the UK but not for the same reason.

We can live in hope that one day the Thai wine producers will become more efficient and prices fall, not holding my breath.

You are of course correct about taxes which distort prices. Actually domestic U.K. wine is more expensive than say Australian. U.K. really doesn’t have the geography to efficiently produce wine to compete with the likes of Australia and southern Europe (I worked in the industry). It costs more per bottle to truck a container across Europe to U.K. than a shipping container on a ship from Australia to Southampton docks! 

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3 hours ago, Chongalulu said:

You are of course correct about taxes which distort prices. Actually domestic U.K. wine is more expensive than say Australian. U.K. really doesn’t have the geography to efficiently produce wine to compete with the likes of Australia and southern Europe (I worked in the industry). It costs more per bottle to truck a container across Europe to U.K. than a shipping container on a ship from Australia to Southampton docks! 

I have been to a couple of the Thai vineyards and still very much in their infancy. Silverlake has grown signifficantly since I first went but still a cottage industry and you effectively pay through the nose for "hand made". 

I don't really fault the government for protecting the industry as more than likely it would disappear. Rather than buy a box as I used to, now just enjoy a glass now and again.

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On 4/16/2024 at 2:18 PM, Chongalulu said:

30 baht per litre of diesel or thereabouts I’ll take all day long thanks. More than twice that in Uk! 

You have to relate it to the price of living. Everything in Thailand must be multiplied by 2.5 to find the equivalent cost in the UK. Therefore, what you quote above actually means it's cheaper to fill up in England.

 

I am unsure how they work it all out but I'm guessing they factor in salaries. The average working class Thai is on about 15-20k per month, so a tank if petrol works out around 10 per cent if their monthly salary. 

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