Thailand’s energy sector faces renewed regulatory risks as the government moves to cap retail fuel prices and considers a windfall tax on refinery Gross Refining Margins (GRM), following spikes related to the ongoing U.S.-Iran conflict in the Middle East. While these interventions triggered sharp declines in share prices for Thai energy stocks—despite rising oil and gas prices—Globlex Securities argues that the downside is limited, pointing to resilient fundamentals in the sector.
Amid soaring global oil and gas prices, Thai regulators have implemented diesel and LPG price caps and are evaluating a potential windfall tax on GRM, aiming to shield the public from higher energy costs. However, analysts warn that such measures may undermine Thailand’s long-term energy security, as lower-than-market fuel prices could mask the nation’s high exposure to fluctuating global energy prices—given its 80% crude oil and 40% gas import dependency.
To maintain capped retail prices, the government has leaned heavily on its oil fund, at a daily cost of at least THB1 billion. As of late March, this has depleted the fund’s balance from a THB2.5 billion surplus at the start of the month to a THB12.6 billion deficit within just two weeks—a trend analysts say is unsustainable.
Official data cited a tripling of GRMs for Thai refiners to THB6/litre (USD31/bbl) since late February. However, analysts note this figure is exaggerated as it omits higher freight and crude premium costs resulting from the conflict. Adjusting for these, actual GRMs are estimated at THB3–4/litre.
Analysts view the likelihood of a GRM windfall tax being implemented as low, citing rapidly rising costs that offset headline GRM gains.
With government interventions seen to have limited long-term impact, Globlex Securities believes the market’s negative reaction has created unjustified share price weakness in refiners and fuel retailers. Top picks among refiners include Thai Oil (TOP) and Star Petroleum Refining (SPRC), while recommended chemical and oil retail plays are PTT Global Chemical (PTTGC), IRPC, PTG, and OR.
