InnovestX Securities noted in its analysis that amid the ongoing volatility in global energy markets, ‘palm oil’ and ‘ethanol’ have come to play an increasingly significant role in Thailand’s energy sector. These resources are crucial raw materials for the production of biodiesel and gasohol.
The brokerage stated that such alternative energies not only help the country cope with skyrocketing global crude oil prices, but also serve as key mechanisms in alleviating the cost-of-living burden for the general public and in reducing the financial risk of the Oil Fuel Fund, which has been shouldering massive energy price subsidies.
For the period of March 9-15, 2026, daily average subsidy payouts reached THB 1.7 billion, leading the Oil Fuel Fund’s balance to a deficit of THB 12.6 billion.
Additionally, the government is preparing further measures by considering adjusting the proportion of biofuel blends to better align with the current situation; for instance, the standard B5 diesel blend has already been increased to B7, with plans to ramp up to B10 or B20 in the future. There are also ongoing initiatives to promote the use of E20 gasohol.
The unresolved tensions in the Middle East, which show no signs of abating, have become a primary factor keeping global crude oil prices persistently elevated. As the costs of fossil energy rise, the appeal and economic viability of biofuels increase accordingly. This dynamic is a significant driver behind the expanding demand for palm oil (used in biodiesel production) and ethanol (used in gasohol) in the coming period.
However, other than the prolongation of the conflict, a development to be monitored closely is the risk associated with the onset of ‘El Nino’—which the Office of the National Water Resources (ONWR) expects to begin in May 2026. This weather phenomenon could exacerbate drought conditions and reduce rainfall, directly impacting the agricultural sector and sharply curbing supplies of palm oil and sugarcane (the main raw materials for ethanol production).
While demand for alternative energy sources surges, the supply could shrink due to drought. This situation presents a significant upside risk that could push crude palm oil (CPO) and ethanol prices even higher than usual.
Companies involved in biofuel, crude palm oil extraction, and sugar/cassava production with integrated ethanol businesses stand to benefit the most, especially those with low-cost inventories and their own plantation areas, with expanded profit margins through inventory gains, and enjoy more stable raw material costs compared to competitors who source new supplies at market rates.
Stocks expected to benefit from these conditions include:
- Biodiesel and ethanol producers (BBGI, GGC, UBE): These companies will benefit from the government’s focus on subsidizing retail prices and reducing E20 prices to encourage usage, which will significantly boost ethanol sales volumes amid high crude oil prices.
- Integrated palm oil producers (UVAN, VPO, CPI): Those with larger plantation areas can efficiently manage costs, fully capitalizing on rising CPO prices, leading to significantly wider margins.
- Sugar and ethanol producers (KSL, KTIS, BRR): These companies will benefit from surging global sugar prices, exacerbated by drought, as well as rising ethanol selling prices in line with reference agricultural commodity trends and market mechanisms.
Nevertheless, these commodities directly impact the cost of living, making them highly susceptible to government intervention, such as mandates to lower biofuel blending ratios, designation as price-controlled goods (such as sugar or bottled oil), or export restrictions to control domestic inflation.
Therefore, the appropriate investment strategy for these stocks is to focus on ‘Cycle Trading’ when there are clear commodity price uptrends, and to exercise caution if there are signs of new government price control measures.
