Diesel Prices Help Drive Inflation in Thailand

Thailand is seeing its highest inflation in four decades as diesel prices are at record highs amid very tight domestic inventories and a worldwide shortage of supply.

From goods transportation to manufacturing and agriculture, diesel powers Thailand’s economy.

Diesel prices have soared to record highs in recent months, adding further upward pressure on inflation in Thailand.

Diesel prices are at record highs, as well as at their largest differential to gasoline in history. Due to a worldwide supply shortage and very tight domestic inventories, prices have reached worldwide highs.

The extremely tight diesel market is unlikely to ease in the near future, considering the increased demand for diesel, other fuels, and crude oil from Russia following the invasion of Ukraine and the ban on Russian imports.

On Monday, the Fuel Fund Executive Board decided to raise diesel prices by another baht to 33.94 baht per liter, effective tomorrow. This comes after a spike in global prices, due to disruptions in supplies from Russia and the lessening of the lockdown in Shanghai.

In line with global trends, the board must decide whether or not to raise the price each week. There was a price increase last week of about one baht per liter.  The price ceiling is now 35 baht/liter.

Demand heightening diesel prices

In line with global oil price fluctuations over the past week, Wisak Watanasap, director of the Oil Fuel Fund Office, said that Brent crude prices rose $2.11, or 1.8%, to settle at $119.72 a barrel on Friday.

Global oil prices have risen due to increased demand following the reopening of China following a long period of COVID-19 lockdown, sanctions on oil and gas from Russia, and the US’s strategic oil reserves.

According to Wisak, global oil prices will remain high until next week.

Through subsidizing domestic oil prices, the Oil Fuel Fund, which has been used to keep prices unrealistically low, has run a deficit of 80 billion baht and has a dwindling cash flow.