Petroleum and Energy Institute of Thailand Denies Oil Refineries Profiting From War

Why It Matters

The clarification tempers public anger over rising fuel costs while highlighting how geopolitical shocks translate into higher domestic prices, influencing inflation and fiscal policy in Thailand.

Key Takeaways

• GRM rose to 6.31 baht/litre in March.
• Implicit costs added 3‑6 baht/litre due to war.
• Retail price hike: 6 baht/litre (~$0.17) announced.
• Government to borrow 120bn baht (~$3.4bn) for subsidies.
• Singapore benchmark sets Thai ex‑refinery price levels.

Pulse Analysis

The surge in global crude prices triggered by the Israel‑U.S. confrontation with Iran has rippled through Thailand’s refining sector. PTIT’s data show the gross refinery margin climbing from roughly 2.1 baht per litre in early 2024 to 6.31 baht in March, a jump driven largely by higher insurance premiums and rerouted shipping costs as vessels avoid the Strait of Hormuz. While the GRM measures the spread between crude and refined product prices, it does not equate to refinery profit, a nuance PTIT emphasized to counter public speculation of windfall gains.

Domestically, the elevated GRM and added implicit costs have forced the Ministry of Energy to lift retail gasoline and diesel prices by 6 baht per litre—approximately 17 U.S. cents. To cushion the impact on low‑income households, Deputy Prime Minister Phiphat Ratchakitprakarn disclosed a plan to borrow 120 billion baht (about $3.4 billion) for the Oil Fuel Fund, extending targeted subsidies. Thailand’s pricing mechanism ties ex‑refinery rates to the Singapore benchmark, a major regional hub where physical and futures markets converge. This linkage ensures price parity; if Thai rates fall below Singapore’s, traders export to Singapore for arbitrage, and vice‑versa, keeping the market efficient.

The episode underscores how external geopolitical tensions can quickly translate into domestic inflationary pressure, especially for fuel‑dependent economies like Thailand’s. Policymakers must balance short‑term relief through subsidies with longer‑term strategies to diversify energy sources and enhance supply chain resilience. As the Middle‑East conflict persists, further volatility in shipping routes and insurance costs is likely, suggesting that Thai fuel prices may remain elevated unless global tensions ease or alternative pricing references are adopted.