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In the face of the new oil crisis, when people are wondering how they could survive at a time when the cost of living is blown sky-high but real incomes are in negative territory, the Thai government has yet to settle on a clear direction to solve the escalating problems. World oil prices hit an all-time high at US$140 a barrel in the first half of 2008 from $100 early in the year. These translated into 40 baht a litre for diesel from 27 baht at local filling stations.
Although surging oil and goods prices are a global phenomenon, wildly fluctuating energy prices and rapid rises of the cost of living have increasingly kept people in Thailand on edge. Growing fears have turned to blind rage and the easiest target is those responsible for running the country _ the government.
Never before has the government faced so many demands from so many groups at the same time. Angry businessmen have called for the government's help as soaring prices have dried up their cash flow. Transport operators and fishermen look for oil price subsidies while commuters pray for a freeze in their fares.
But so far, a clear direction has yet to be determined by energy policy planners, led since early this year by the former biochemical lecturer, Lt Gen Poonpirom Liptapanlop, the wife of Suwat Liptapanlop, one of 111 executives of dissolved Thai Rak Thai party.
Prompted by a rush to appease protesters, the measures implemented in the first half of 2008 were confusing at best. Numerous subsidy schemes for mainstream fossil fuels were approved hastily to meet the demands of the day while the many choices of alternative fuels boggled the minds of automakers.
The former energy minister, Piyasvasti Amranand, left the industry in good shape when he stepped down early in 2008, setting the right tone with a series of crucial, albeit painful, reforms that were widely applauded as among the most effective in Asia. They include the passage of energy bills and industrial frameworks, timeframes for energy security projects and the new 15-year power development plan (PDP) ending in 2021.
But from day one, Lt Gen Poonpirom sank the planned phased-in floating of liquefied petroleum gas (LPG) price initiated by Dr Piyasvasti by fixing it at $320 a tonne until July to curb the burden of households, even as its world price had surged to nearly $900 and so many vehicles have been modified to use the fuel, taking advantage of the subsidised rate intended for households.
Thanks to her decision, Thailand, once an LPG exporter, has turned into an importer due to the skyrocketing demand for the artificially cheap LPG in the transport and industrial sectors.
In May, the energy minister, with the support of Finance Minister Surapong Suebwonglee of the People Power Party, ''requested'' that the oil refineries under the state-owned PTT Group cut their margins for diesel by three baht per litre for the agricultural, public transport and fishery sectors. Truck operators will be the next in line to be included in the scheme thanks to their vocal protests.
As consumption of cheap LPG soared, the Energy Ministry tried to apply damage control by encouraging motorists and industries to replace their LPG systems with compressed natural gas (CNG) ones.
But the solutions only gave rise to new problems. The number of CNG facilities and filling stations remained inadequate despite PTT's plan to hasten construction. The CNG price, at 8.50 baht a kilogramme, is also subsidised, well below the cost of 12 baht.
Stuck at dead ends everywhere in the world of fossil fuels, the state turned to alternative energy with the commercial launch of the greener E85 gasohol two years ahead of its earlier plan.
It also initiated a 15-year renewable-energy plan, focusing on research and development of technology and management of renewable energy (RE).
Since 2003, the government has tried to reduce the country's dependence on fuel oil and diesel, particularly natural gas, for fear of the inevitable _ the premature exhaustion of limited domestic natural gas resources _ due to heavy use in electricity generation.
Through price incentives, the state aimed at encouraging more private power producers to use more RE, such as solar, wind and biomass instead of fossil fuels. The goal is to raise the country's RE share to 8% of all energy used in 2011 from 0.5%. The share is only 2% now.
Thailand is also carrying out a feasibility study for a nuclear plant to be built by 2020, which could help, provided it does not meet the same fate as two coal plants that were scrapped under the weight of heavy protests a few years ago.
But to date statistics from the EPPO show a significant increase in investment in mainstream fuels such as coal and hydropower, with only a modest fall in the dependency on fuel oils and diesel.
Natural gas still leads in the fuels used for electricity generation, with only a small drop to 66.8% in 2007 from 72.4% in 2003, while the share of coal has increased by 300%. Reliance on imported electricity also rose by 47% in 2007.
Some of the measures have raised concerns among energy experts and businessmen about their long-term effects. The LPG price cap not only boosts consumption out of control and cripples refineries and gas-separation plants, but also triggers smuggling. More fishing boats are reported to have shifted to becoming LPG smugglers to make more money.
In addition to upsetting market mechanisms, subsidies, especially for diesel, keep users out of sync with reality and give them no reason to save on fuel bills or switch to alternatives.
Proper preparation and adequate supply are another concern. Like E20, the E85 push could backfire if ethanol output fails to keep up with soaring demand, expected at 12 million litres a day when the new fuel becomes mainstream. The current capacity stays at 1.55 million litres a day.
Conflicting tax incentives are also a major headache for automakers, who now have E85 to deal with, in addition to eco-cars and E20 to which some have already committed hefty investment.
All these factors could derail government efforts to promote alternative fuels, another waste of big budgets for nothing.
Lt Gen Poonpirom says the public should realise that pump prices will never go down to 30 baht a litre and we must learn to use less energy.
Indeed, the inconvenient truth is that $150 a barrel in the second half of 2008 is not inconceivable, and no subsidies can sustainably help, but will just deplete state coffers. The best solution for oil importers like Thailand is to wean themselves from fossil fuels and use more alternative or recyclable energy.
Time is running out for the government, which needs to focus on long-term development. It also needs to muster the courage to push ahead with unpalatable reforms, rather than compromise them on impulses to please voters.
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