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Baht/$ 33.51/56
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GOLD |
14,350
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BUSRIN TREERAPONGPICHIT
Years from now, the first six months of 2008 could be recorded as one of the most memorable periods in history and one of the biggest nightmares for oil-importing Thailand.
World oil prices soared to an unexpected high of $140 per barrel in June from $100 at the beginning of 2008. By then, analysts had abandoned any attempt to calm the frayed nerves. They declared the unimpeded spiral would continue and it would only be a matter of time before they reached $150 a barrel.
Although the trend of high oil prices has been going on since 2003, even the most pessimists have never imagined the extent and speed of the increases.
All fingers have been pointing first and foremost to the growing demand spurred by rapidly developing Asian countries, in particular China and India, where almost half of the world's oil consumers reside.
The economic slump in the United States, triggered by the sub-prime mortgage crisis, only serves to exacerbate the situation. The US dollar, which had until recently plunged to record lows against all currencies, was responsible for the spectacular ascent of oil prices by more than $20 within two weeks.
The dollar decline has also prompted speculators such as hedge funds and sovereign wealth funds to shift their investments from US stock markets to oil, gold and other commodities, creating price bubbles in those markets. Investments in these assets have grown to $235 billion in May 2008 from $70 billion two years ago.
Sporadic unrest and violence faced by some oil producers such as the Middle East and Latin America have worsened the overall situation. As oil is a price-sensitive commodity, such atrocities caused crude prices to swing wildly in the first half of 2008.
Among all analysts, Goldman Sachs seems to have had the most impressive record so far. Two years ago, the American investment bank was the first to forecast that crude prices would hit $100, raising eyebrows across the world. Ominously, it recently upgraded its target price for the second half of 2008 from $107 to $141 per barrel, or $34 a barrel. A few weeks after its announcement, the oil prices hit a record $140 a barrel.
Other investment banks such as Credit Suisse revised up their forecasts as well. They viewed that the global crude supply is expected to be tight because many oil producers, especially non-Opec countries, are struggling to find new reserves due to limitations on foreign investment.
Declining production in mature fields, especially in the North Sea, also put pressure on the supply. Meanwhile, demand from China, India and the Middle East keeps rising, buoyed by government subsidies.
Due to all these factors, which show no sign of abating, most analysts predicted more gloomy figures of $150 to $200 per barrel would be seen over the next six months.
The rest, however, saw the high prices as a sign of imminent bursting of the bubble.
In any case, the oil prices will continue to dictate global economic performance since the prices of other goods hinge on them. How a country fares in the expensive-oil regime depends on the share of the cost of oil in its national income.
Undeniably, for countries with poorly managed, inadequate logistics systems including Thailand, the trend will continue to unleash a disaster, the extent of which depends on the degree of their dependence on imported oil.
Meanwhile, the ability of end-users to reduce their consumption and switch away from oil has proved modest after all these years.
In Thailand, 60% of all transport modes, especially for deliveries of goods and mass transit, remain dependent on oil, especially diesel, which traded above $170 a barrel in Singapore in May.
Not surprisingly, car owners in Thailand moaned about sharp rises in retail petrol prices, from 33.29 baht a litre of premium petrol and 29.74 baht for diesel to 40 baht and nearly 40 baht respectively in May.
For lack of any evidence to the contrary so far, pump prices will continue to soar. The best strategy therefore is to get used to them. Do whatever you can to cut back on your oil consumption and use alternative fuels where possible such as gasohol, biodiesel or compressed natural gas.
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