Bangkok: Prepare for oil prices to surge to $100! Tensions in the Middle East have escalated again after President Donald Trump rejected Iran's offer presented through Pakistan. Leading economist Dr. Supavud Saichue analyzed the underlying causes of the conflict, which appears to be "as far apart as the ocean" and is severely impacting global energy supply chains.
According to Thai News Agency, the core of the failure in these negotiations is "conflicting expectations." The US side wanted only a broad agreement, or a single MOU, to quickly end the war, but a crucial condition was that Iran immediately agreed to end its nuclear program. Iran, in turn, responded with a four-page document full of conditions, such as the release of seized assets and the lifting of sanctions before nuclear negotiations could take place later.
Despite Trump's assertion that Iran has lost the military operation, this is a "test of endurance." Iran is losing a massive amount of revenue, $400-500 million per day, resulting in a 10% drop in GDP within just over 70 days of the conflict-a severity comparable to Thailand's 1997 Asian financial crisis. However, the CIA estimates that Iran can withstand the pressure for another 3-4 months, as it still produces its own food and has sufficient oil refining capacity for domestic use. Furthermore, Iran's stockpile of rockets and launch sites remains at 70-75%, making it difficult for the US to easily reopen the Strait of Hormuz.
In the overall global market, over 1 billion barrels of oil were lost during the first two months of the war, or approximately 16 million barrels per day. Even with reserves and alternative routes to compensate, a shortage of about 7-8 million barrels per day remains. Dr. Supavud warns that the "D-day" when oil reserves will truly run out is at the end of June, which will cause oil prices to skyrocket. Interestingly, the current physical price of oil has already reached $141, while the price of paper in the global market remains volatile at around $100.
For Thailand, every 30% increase in fuel prices will create an additional burden of approximately 300 billion baht. Dr. Supavud analyzes that if fuel prices continue to rise, the 400 billion baht loan from the emergency decree that the government is preparing to release to stimulate the economy may be completely absorbed by the increased energy costs. A sustainable solution is for the government to strike a balance between subsidizing prices to help those affected and allowing prices to reflect market mechanisms to encourage a shift towards cleaner energy sources.
The upcoming negotiations between Trump and Xi Jinping could be a turning point, but China also has increasing bargaining power regarding Taiwan and its role in assisting Iran. Ultimately, this conflict may not have a "beautiful ending" as long as the two sides remain on opposite sides of the ocean, and the ones bearing the heaviest burden are the citizens and businesses facing inevitably soaring living costs.