Higher global crude oil prices following Saudi oil attacks may increase Thailand’s inflation rate this year by 0.3 percent, according to Kasikorn Research Center.

The think tank made an assessment on such an impact on the Thai economy is based on two scenarios.

First, if Saudi Arabia does not launch military retaliation, global crude oil prices will likely spike over the short term for only a few weeks. 

Under this scenario, Kasikorn Research Center expects that global crude oil prices may gradually decline towards the level before the Saudi Arabia’s oil refinery attacks and this may affect headline inflation from September to October, 2019. 

As a result, headline inflation during the fourth quarter of this year may increase 0.05 percent over the current projection, bringing the average headline inflation rate for 2019 to 0.84 percent.   

However, if Saudi Arabia launches military retaliation against the attacker, global crude oil prices will likely stay at high levels until the end of 2019. 

The steepened instability and a likelihood that global crude oil supply will decline may cause Brent crude oil price to move within a range of USD70-80/barrel during the final three to four months of 2019 and this may have a greater effect on the Thai economy. 

Kasikorn Research Center has assessed that if the global crude oil prices climb to USD70-80/barrel during the fourth quarter of this year, diesel fuel price in Thailand may lean towards USD30/liter. 

As a result, the average headline inflation rate projected for the fourth quarter of this year may double from 0.72 percent to 1.48 percent, bringing 2019 headline inflation to 1.08 percent or up 0.3 percent from initial projection.

Drone attacks on Saudi Arabia’s two major oil refineries on September 14, 2019 has sparked fears among investors worldwide over oil supply disruption because Saudi Arabia is the world’s largest oil producing country. 

Source