Bank of Thailand economists have suggested in a research paper that the Kingdom should turn the fuel-price crisis into an opportunity to strengthen the country's long-term energy security.

They suggested that now is the time to increase the pace of improving mass transit and logistics systems, to diversify energy sources and to expand the use of renewable energy.

Economists Yunyong Thaicharoen, Jariya Premsin and Watsaya Limthammahisorn of the BOT's Monetary Policy Group wrote in their paper that the rise of crude oil prices, which have almost quadrupled since the beginning of 2002 and threaten to soar even higher, is the major risk to stability in the world economy.

Efforts to develop new supplies will encounter obstacles including expensive investment, the development of new technologies and geopolitical risk, especially in countries that own the majority of the world's remaining oil reserves, according to the report.

Despite higher prices, demand for oil is projected to grow continuously, fuelled particularly by strong demand from fast-growing China and India, which account for almost 40 per cent of the world's population. As a result, most market experts agree that there is little chance for the return of oil prices to the low levels of 1986-2000. Therefore, every country needs to re-evaluate and adjust its own energy strategy to prepare for a changing world energy landscape, they wrote.

Though the discovery of natural gas in the Gulf of Thailand in the 1980s helped reduce its oil dependency compared to past oil shocks, the significant vulnerability of the economy to higher oil prices remains, according to the report. Oil continues to be the Kingdom's main source of primary energy, and it needs to rely on imports for roughly 90 per cent of its oil consumption.

And in the case of natural gas, which has become the energy of choice for electricity generation, it is expected that both price and import share will also rise in the future, adding to concerns over energy costs and supply security. In addition, the local economy also exhibits a relatively low level of energy and oil efficiency by international standards, reflecting the unbalanced approach of past development policies, which gave priority to economic growth while too little attention was paid to improving energy efficiency, they wrote.

Addressing these structural problems successfully will be crucial in guarding economic stability and advancing competitiveness in the years ahead.

"As a nation, we must turn this energy crisis into an opportunity to strengthen our long-term energy security," the three wrote. "This will call for effective management for both demand and supply aspects of the energy equation."

To promote energy efficiency, the government must accelerate upgrading public transportation and logistics systems, raise energy efficiency in the manufacturing sector, adjust the power-pricing structure to better reflect actual costs to society and utilise a balanced menu of measures aimed at providing market incentives and enforcing regulations.

As for supply security, the policy should focus on diversifying main energy sources and promoting the development of renewable energy by establishing an appropriate pricing framework and supporting research, especially for energy alternatives that best leverage the country's comparative advantages.

Lastly, the national energy policy must place a priority on achieving long-term objectives for sustainable development, set clear operational targets and build consensus through honest and transparent communication with the public.

Yunyong, Jariya and Watsaya will present their findings on "The End of the Low Oil Price Era: Lessons and Challenges for Thailand's Energy Strategy" at the BOT's annual symposium at the Shangri-La Hotel on Wednesday and Thursday.