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Oil price surge can deter economic recovery


March 14, 2008

Oil price surge can deter economic recovery

Rising oil prices could deter the country's economic recovery and fuel rising inflation, according to the Bank of Thailand.

Many have begun to worry that the continued increase in the crude price will affect Thailand's economic recovery, particularly local consumption which is seen as picking up in the fourth quarter of last year and the first month of this year.

The price of crude oil price had surged to $109 per barrel at present and is likely to further rise to $120 per barrel within this year, wrote Siripan Nakornthap, head of Central Bank’s economic analysis team in an article,  on Thailand's "Energy Policy in Time of Major Oil Price Rises".

It might have a domino effect on production and employment, leading to a less-than-expected degree of recovery in the economy. In addition, it could worsen inflationary pressure if the crude price continued its surge.

Siripan said her team saw a need for the government to implement an alternative energy policy. However, the government must realise the policy implementation would fuel rising energy plant prices, which could then have an impact on food prices.

To address the problem in the long term, the team suggested that the government set aside a budget to invest in construction of the mass transit system, encourage the private sector to reduce energy consumption in the production process, and promote energy-saving campaigns.

Crude oil prices in the world market hit a new high in 15 years of $110 per barrel on Wednesday's trading and are likely to continue to rise to $120 per barrel soon, according to market experts.

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