Why is the Petrol in Thailand expensive?

The price of retail petrol in Thailand on 11 April 2024, diesel prices have passed over 30.44 baht/liter, benzene is 47.84 baht/liter, and gasohol 95 is 39.95 baht/liter, which is likely to increase further.

As you know, even though Thailand can drill petrol for domestic use, that is not enough to meet the demand. According to the 2011 average crude petrol demand, Thailand’s demand for refined petrol was 951,000 barrels per day, while Thailand’s production capacity was only 100,000 barrels per day, making Thailand have to import it.

As a result, factors affecting petrol prices in the world market will also affect petrol prices in Thailand. Moreover, to import petrol at the lowest price, Thailand must import it based on the market price in Singapore because it is the closest petrol market to Thailand and is the petrol trading center in Asia and all countries in the region will rely on petrol prices from the same source.

What factors are there that cause crude oil prices in the world market to rise? Let’s look at some of these factors together!

The reason why there is a rise in crude oil prices in the world market

The remaining amount of crude oil
If each refinery has a small amount of crude oil purchased for refining, it will require a large amount of crude oil. As a result, global demand will increase, which will also pressure prices to rise as well.
Currency Exchange Rate Factors for Crude Oil and Refined Oil
In major global markets, petrol is traded in US dollars. Therefore, when changes or fluctuations occur in the exchange rate between local currencies and the US Dollar, such as the appreciation-depreciation currency, the cost of purchasing crude oil or refined petrol will change accordingly.
Organization of the Petroleum Exporting Countries or OPEC agreement
As OPEC needs to maintain price stability to be not too high or too low, analysts predict that OPEC+ will likely maintain its production capacity reduction policy until a full meeting in June 2024.
Weather and Disaster Factors
Apart from the surrounding factors, severe weather and disasters in petrol fields such as hurricanes or earthquakes that cause damage to the production sites or pipelines will also affect crude oil production for the market as well.
Conflict issues
- Russo-Ukrainian War
One of the world’s major petrol-producing countries. The conflict between Russia and Ukraine remains tense after Ukraine continues to attack petrol refineries and infrastructure in Russia.
Recently, Russia plans to reduce diesel exports through the Black Sea and Baltic Sea ports by 21% to 2.29 million tons (approximately 570,000 barrels/day) in April, as many refineries shut down after the Ukrainian drone strikes.
- War in the Middle East
The war between Israel and the Hamas group caused damage and the tense situation between Iran and Israel, which were openly preparing for war after high-ranking officials were attacked to death. Iran has announced that it will take revenge on Israel in all countries that have Israeli embassies first.
Government Policy
In many countries, petrol prices are subsidized, which will help lower petrol prices, but if not supported and used that money for other developments, petrol prices may rise higher than in other countries because retail petrol prices in each country depend on government policy.
Currently, the pegged price has exceeded the government’s ceiling due to the price of 30 baht per liter since September 2023, which makes the Fuel Fund almost minus 100 billion baht. At present, negotiations are underway to reduce the diesel tax by 1 baht per liter due on April 19, 2024

How will Thai petrol prices adjust in the end? In addition to depending on foreign factors, there are also tax and petrol fund issues from the government’s policy. Therefore, those are the reasons why does the price of petrol in Thailand not immediately adjust according to the price of petrol from the world market.