Crude Oil is a natural resource that the world needs and Basil is a processed raw material to obtain fuel or other products. It is widely used in the transportation and production industries in various sectors. Therefore, when the price of crude Oil adjusts, it will affect the cost of consumer goods in both sectors. Therefore, the state, the people’s sector, and the entrepreneurial sector keep up to date with the news to operate appropriately in managing various costs.
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Traders Must Know Why Oil Prices Rise
Rising oil prices in 2022 and the past have contributed to the volatility of stock prices. Investors in the stock market predict that the energy-related industry will increase profits. However, production and services use fuel in production directly. Alternatively, having to rely on logistics and transportation will have higher costs. Therefore, you should balance your portfolio by adjusting your stock market strategy and investing in index or other funds.
Meanwhile, another group of traders has already invested in stocks or funds. It is also interested in crude Oil as a commodity, which can be speculated in advance to make a profit between the future reference price and the actual market price at any given moment. By giving weight to investing in the derivatives market.
Therefore, if looking in terms of speculative investment, Rising oil prices are a good thing to help your loan grow by leaps and bounds.
Connection of Crude Oil to Cars
Crude Oil is a natural resource derived from fossils and is usually located beneath the earth’s surface or under the sea, and high-cost drilling is required. Moreover, it is one of the natural resources that are used up. Therefore, as the days go by, the price of Oil has risen according to the increasing human demand as the amount of crude oil that can be extracted is gradually depleted.
Crude Oil has been dubbed the “black gold” before compared to its value. Like gold, crude Oil is always in demand. Moreover, in the policies of each country, In addition to collecting gold for stability Crude Oil is also part of the collection. In conditions of high volatility in the currency, gold and crude Oil will be an investment choice for both the government, institutional and private sectors, whether directly or indirectly, because it is practical and has a fixed exchange market.
However, cars and vehicles do not use crude Oil. However, using fuel to drive crude Oil in the form of petroleum must be taken through the refining process first. To get out of the fuel that we are familiar with.
There are only three major crude oil markets in our world compared to the world’s invaluable human demand:
- West Texas Intermediate (WTI) Crude Oil Market – Major Market in the Americas
- Brent Crude Oil Market – The Big Market in Europe
- Dubai Crude Oil Market – Big Market in Asia
While Thailand does not have any commercial drilling for Oil, or it has to use higher costs to refine it into fuel, it is not at all that Thailand has to buy crude oil from abroad.
Almost all of the fuel that fills cars in Thailand brings crude Oil from abroad to be distilled in the country. Drivers of various vehicles, either a car or a motorcycle, bear the cost of crude oil production from various markets, including refining from domestic refineries.
How does “Singapore oil price” Relate to Thai Oil?
Singapore is the largest crude oil importer and exporter in Asia. And closest to Thailand by distance. Buying Thai crude Oil and purchasing Singapore crude oil to refine The costs should be the same, and Singapore fuel prices are set as reference prices for Thai fuel sales. To show that Thailand is controlling the cost of importing correctly.
In addition, with the enormous sales volume for Singapore’s exports. That makes Singapore fuel prices an excellent market price. Alternatively, it is determined by demand (Demand to buy) that meets supply. (sales demand) In Asia, It is reasonable to use the Singapore fuel price as the available price to refer to the Thai fuel market.
Despite the controversy, several Asian countries have built their refineries, including China, Japan, and South Korea, and are already importing less from Singapore. However, the amount that many countries produce is enough for some domestic use only, and we still need to import another part as well. Moreover, Singapore’s fuel prices also fluctuate in line with the three major markets and the rest of the world, so Thailand has no reason to change its fuel pricing criteria.
The analysis of oil price trends in 2022 and the coming years should be studied in parallel between the price trends in the Singapore oil market and the energy policy of Thailand.
Why is the Oil Price Rising?
Economic growth will increase the demand for Oil may be to increase production, transportation or service, or generating electricity because people have purchasing power. The high oil consumption is not proportional to the crude oil reserves. Alternatively, insufficient reserves of refined fuel will increase the price level of domestic or global crude Oil. While if the economic recession uses less Oil and has spare Oil, The price of Oil will be lower.
Amount of crude Oil according to production plan If drilling producers or refiners miscalculate market demand Or produce according to the plan but does not correspond to the quantity that needs to be used. Will increase the price of oil capacity enhancement. If produced and left or any country that has accumulated a lot or many countries have accumulated a lot, The price of crude Oil will be lower. For example, in the case of crude oil reserves in the United States during April 2010, with the CPOVID-19 situation, people did not leave their homes. They are causing the use of oil reserves not to meet the target.
Weather in cold countries More fuel and diesel fuel may be needed for heating. Crude oil prices rise as demand increases to purchase both oils. (fuel oil is a product that can be distilled from petroleum but cannot be used in automobiles.)
Political stability If the country that exports crude Oil has political problems. This may cause the supply of crude Oil in the market to decrease. Moreover, crude oil prices have increased, such as in the case of Russia-Ukraine, Because Russia is one of the world’s largest crude Oil exporting countries. It is third after the United States and Saudi Arabia, thus increasing the price of Oil in the market.
Exchange rate, Crude Oil is usually traded in US dollars. If a currency depreciates (for example, using more baht to exchange the same dollar for the same dollar), the cost of buying crude Oil in countries where the currency is depreciating increases.
Alternative energy or renewable energy The more technology and innovation facilitate using renewable energy or alternative energy instead of fuel from Oil. The demand for Oil will decrease even more. Moreover, the price of Oil will be lower too.
All in all, oil prices rose due to a combination of factors. And not only able to adjust but can also be reduced by level.
Oil Price Structure in Thailand
Fuel price structure It is a data table showing the price of Oil from the refinery to the retail as announced by the Energy Policy and Planning Office. Ministry of Culture by the oil price structure announced. It is only used for daily reference and is not a purchase price set by the government because Thailand supports fair competition between energy businesses.
Example of oil price structure (Information dated August 26, 2022)
- Table source: Oil price structure (eppo.go.th)
- Unit: Baht/Litre: Fuel type
- Ex-Refine: Refinery price or crude oil price
- Tax B./Litre: Excise Tax
- M. Tax B./Litre: Interior tax (municipal tax)
- Oil Fund: money collected/subsidy from the fuel fund
- CONV. Fund: The money collected for the Energy Conservation Promotion Fund.
- Wholesale Price (WS): Wholesale price.
- VAT: VAT on wholesale prices.
- WS&VAT: Wholesale price, including VAT.
- Marketing Margin: The cost of running a business for a retailer. Combined with expected profit
- VAT: VAT on marketing fees
- Retail: retail price
What Does the Oil Fund and Future Risks
Oil Fund in Thailand It is a fund that maintains the price stability of Oil. Causing the price to not change rapidly according to the world market price or suddenly or the price is too high that people suffer.
Currently, the price subsidy does not apply to the gasoline used by the general public. The fund brings in revenues derived from excise taxes charged by domestic fuel producers. Tariffs that the Customs Department collects from oil importers and money from oil traders and concessionaires doing gas business are divided into fuel subsidies: Gasohol 95 E 85, Gasohol 95 E 20, Diesel B20, and Diesel B10.