The financial crisis that intensified in the US around the middle of 2008 and then adversely affected the economic and financial sectors in the EU, Japan and Asian countries, is showing signs pointing a global economic recession.
At the same time, oil prices have weakened sharply to an average of just USD70/barrel in October 2008, from a record high of USD147.25/barrel on July 11, 2008. This has heightened concern in many countries about the magnitude of the global financial turmoil. In the US, it has eroded consumer spending there quite severely. Observers have projected that oil demand in the US – which is the world's largest oil consumer – will fall sharply and would then further erode confidence in the US crude oil futures market. In light of this outlook, it is expected that global crude oil prices will continue their declines through 4Q08 into 2009.
However, the risk of the global financial crisis and rapidly falling oil prices in the global market has resulted in falling differentials between the prices of petroleum-based fuels and bio-fuels, thus causing energy crop demand to falter. In 2009, it is expected that the trend in demand for energy crops will diminish further from 2008, a year in which energy crop prices rose to historic highs on food shortages and high crude oil prices earlier in the year, ultimately causing many countries to give more attention to alternative energy resources.
It is expected that the domestic price of energy crops in 2009 will remain unchanged from 2H08 amid many risks, such as increases in energy crop production, pressure from fluctuating oil prices in the global market and concern about the magnitude of the global economic crisis. After considering the impact on farmers planting energy crops, entrepreneurs investing in the alternative energy business and consumers, as well as on government energy policy planning, KASIKORN RESEARCH CENTER (KResearch) views that the future for Thai alternative energy business will depend on clarity in government's policies. They should not focus only on the worth of bio-fuel as a function of production cost, but also on our national energy security in the long-term.
The government should develop bio-fuels, including ethanol and bio-diesel, in order to ensure sustainable energy resources and help reduce our reliance on crude oil imported from foreign countries. The government sector should forge ahead with strategies with development sustainable alternative energy resources to ensure our energy security.
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