Thailand braces for higher fuel and energy costs

The full impact of international fuel price rises and inflation is about to arrive in Thailand. After many months of shielding the full impact of price rises, mostly with a diesel subsidy which capped the pump price at 30 baht a litre, the prices are now set to soar

The government’s diesel subsidy has been in place since last October but the cap, keeping the price at 30 baht a litre, finished at the end of April. After threatening that the price could rise to 40 baht a litre, the Thai Energy Minister has now arrived at a new cap of 32 baht, still heavily reliant of a dwindling pool of subsidy funds. But he’s warned the cap and government subsidies can’t last forever.

Most of Thailand’s transport logistics rely on diesel fuel, so any increases of fuel costs will impact almost anything that is delivered from one place to another. So that’s EVERYTHING.

Economists fear that the Thai government, allowing fuel prices to gradually rise, will heavily impact the recovery of businesses and household spending.

The Energy Minister, in raising the diesel cap from 30 to 32 baht said that the cabinet will make the rises at the pump incremental. Now trucking and delivery companies are looking to urgently upgrade some of their business and logistics practices to try and contain at least some of the rising fuel costs.

Alex Ng, Kerry Express’s CEO told the Bangkok Post that Kerry achieved a 12% improvement in delivery efficiencies “by embracing smart routing through data analytics for its trucks and motorcycles”.

Other companies say they are looking to change their fleet to electric, LPG or simply more efficient trucks and vehicles. But they acknowledge these changes can’t happen overnight and involve an injection of capital at the same time their businesses are still recovering. The cost of LPG is approximately half the price of gasohol or petrol prices.

Other companies that primarily use motorcycles as the core of their deliveries are also suffering. Filling up the humble motorcycle has gone from a cost of around 80 baht a year ago to around 140 for a full tank now.

SOURCE: Bangkok Post