Oil price fears spike in conflict

Oil price fears spike in conflict

Surge to affect Thai cost of living

Business leaders are increasingly worried about the escalating Russia-Ukraine conflict, with rising oil prices threatening to drive up living costs.

The crisis has sent Brent crude futures to US$97.66 a barrel, the highest level since September 2014, and global stocks have plunged.

Analysts at PTT Plc cited Suhail Al Mazrouei, the United Arab Emirates' minister of energy and infrastructure, as saying expensive oil was attributed to the Russia-Ukraine conflict, not supply and demand problems.

The Russia-Ukraine dispute has become more volatile with the US and its European allies considering the imposition of sanctions on Russia following Moscow's decision to recognise two breakaway regions in eastern Ukraine.

ENERGY PRICE PRESSURE

Though the sanctions will not directly affect Thailand, the country must brace for a surge in global oil prices, according to the Federation of Thai Industries (FTI).

The sanctions are primarily aimed at causing difficulties for major Russian banks, as US financial institutions will be instructed not to handle their international transactions.

But the sanctions will worsen expensive global oil prices, which is causing problems for Thailand's transport and industrial sectors, said Supant Mongkolsuthree, chairman of the FTI.

Transport operators will have to pay more for oil while factory owners, who depend on oil as a key fuel, will succumb to high production costs, unable to fix goods prices, he said.

Consumers will eventually bear the brunt, Mr Supant said.

Sanan Angubolkul, chairman of the Thai Chamber of Commerce, urged the government to continue capping the diesel price at 30 baht per litre for as long as possible, as well as maintain product prices for consumers to keep their cost of living low.

Ronnarong Phoolpipat, director-general of the Trade Policy and Strategy Office, said the heightened conflict and international sanctions are expected to continue to drive up the price of oil until the end of this year.

Logistics and parcel delivery businesses, for which fuel is the essential cost, have been unnerved by the escalating conflict.

Responding to surging oil prices, Jason Qian, chief executive and president of Best Logistics Technology (Thailand), a parcel delivery and fulfilment service provider, said the company will look at bringing in more automatic sorting machines to reduce costs, which are being pushed up by oil prices.

The company has also begun using electric vehicles (EVs) in Pattaya through cooperation with EV makers to reduce fuel costs, Mr Qian said.

LIMITED IMPACT

Chaichan Chareonsuk, president of the Thai National Shippers' Council, said Thailand's export orders are unlikely to suffer any adverse impact from the conflict in the first quarter.

But for the second quarter, he admitted the prospects are uncertain, depending on the scale of the conflict.

However, Mr Chaichan expected the conflict to become more widespread and protracted, with the sanctions likely to extend the conflict into the Baltic Peninsula.

In the longer term, if the conflict is protracted and becomes intense without any concrete solutions, it will definitely affect world economic growth, he said.

TOURISM WATCH

Association of Thai Travel Agents president Sisdivachr Cheewarattanaporn said tensions in European will definitely affect the tourism industry as people reconsider taking overseas trips.

He said the pandemic has made people hesitant, but the political rift will become another factor for them to consider.

Tourism Authority of Thailand governor Yuthasak Supasorn said the agency is closely watching the situation. In the short term the political tensions may have a psychological effect on a number of travellers.

However, he said as long as international flights can operate as scheduled without passing the conflict areas and there's no travel restrictions, there should not be a tremendous impact on Thai tourism.


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