Thailand predicts oil prices to stay high for at least two years because of the Middle East conflict, its finance minister said, indicating that the country will experience long-term pressure on oil prices when it is already facing increasing costs and decelerating growth as a net energy importer.

The Middle East has had its energy infrastructure so badly hit that the supply of oil and gas could take one to two years to normalise, Finance Minister Ekniti Nitithanprapas told lawmakers on 9th April during a parliamentary debate following the government’s policy statement.

“The era of low oil prices is long gone, at least in the coming one to two years,” he said.

The energy shock has already begun taking its toll on the growth prospects of Thailand, and the central bank on Thursday promised to maintain its interest rate where it is currently at as long as possible to help the country. Economists have started to cut growth projections of the country, where rising fuel prices are affecting consumption and destabilising exports and tourism, which are major economic drivers.  

“The new government led by Prime Minister Anutin Charnvirakul intends to speed up the implementation of solar power, biofuels and other renewable energy to insulate households and businesses against the increased cost of energy,” Ekniti said.

Thailand has been very dependent on diesel subsidies to protect households and industry. Officials estimate that the state oil fund is incurring an expenditure of approximately 1.24 billion baht (US $38.5 million or RM153.6 million) per day, putting it into a deficit of over 57.7 billion baht.

Ekniti referred to the fund as the government’s first line of defence, denying the demands by the opposition legislators to reduce fuel excise taxes, claiming that the effect would be the same but would decrease the amount of revenue required to fund public services.

Further support measures are under consideration. The cabinet will also consider more relief to the transport sector and the vulnerable, like farmers and fishermen, and allocate contingency funds in case the war continues. 

The finance ministry also intends to suggest 30 billion baht of relief, such as cash to low-income earners, low-interest loans to buy solar panels, and also to buy fertilisers, Ekniti told reporters in a briefing on Friday. He also added that the government is thinking of a car trade-in programme to expedite electric or hybrid vehicle adoption. 

Ekniti said that the government is hoping to increase the gross domestic product to more than 3 per cent this year, whilst looking at the possibility of stagflation amid limited fiscal ammunition.