Thai Ethanol Strategy - Not Optional

Earlier this year the Thai government recognized that something needed to be done about the fuel situation. Thailand had long subsidized motor fuel to keep the cost artificially low. Finally, rising global oil prices forced the government to take action.

It would be easy to criticize the government for failing to take action sooner but neighbors Indonesia, and more recently Burma, left it later, and were forced to take more dramatic measures leading to public demonstrations of frustration as prices at the pumps soared overnight. Since Thailand acted sooner, a more measured approach was possible with prices risen gradually.

Thailand has also adopted an aggressive campaign to promote the use of Gasohol. Their campaign is enjoying a good start with use of Gasohol 95 rising gradually, despite early fears that it may cause damage to fuel systems in cars using it. Some of these fears seem to be falling away as people learn more about the fuel, but in reality - no matter what you feel about Gasohol - resistance may well be futile as the Thai ethanol strategy pushes on.

No Choice!

The government has mapped out a few milestones in its strategy, and if you are one of those who is uncomfortable with Gasohol, things are not going to get better.

By 2007 ALL 95 octane petrol will use ethanol (Gasohol) rather than the methyl tertiary-butyl ether (MTBE) additive used in "regular" 95 octane fuel.

And, to prove that the government is very serious about the long-term future of it's ethanol strategy, the Energy Ministry has earmarked 2020 as the time by which all new cars should be capable of running on 100% ethanol! Not sure where diesel engines fit into this strategy however.

To my mind the second date is both realistic and worthwhile. Engines that run on pure ethanol exist today. Flexi-Fuel engines have been employed in Brazil for years, and are currently in limited operation in the UK. The reason for the 15-year window here is down to ethanol production.

But a complete ban on 95 octane by 2007 is perhaps a bit harsh. Okay, regular 91 octane fuel will be available and those with classic cars, or performance vehicles can make do with the lower performance fuel. Is this really necessary though? If gasohol is viable, cheaper, offers comparable performance and economy, doesn't damage cars, and is less destructive to the environment that regular fuel, isn't it only a matter of time before it completely takes over from regular gasoline anyway? Why ban it at all?


The ban on 95 octane serves to provide a guaranteed demand for ethanol, and this should spur investment in ethanol production in Thailand.

Currently Thailand only produces approximately 300,000 liters of Ethanol a day, or about 60% of the domestic demand for gasohol production. The remaining 40% is imported from Brazil. Thailand desperately needs to increase production for it's ethanol strategy to have positive economic effects.

Thai Oil is currently considering a multi-billion baht investment in an ethanol production operation that could produce 1-2 million liters a day. A decision is expected by the end of the year.


Currently Gasohol is more costly to produce that regular gasoline! The 1.50 baht difference between Gasohol 95 and regular 95 at the pumps is the result of a reduction in tax on gasohol. One of the difficulties to face is reducing production costs of gasohol sufficiently.

So what was my theory on the ban? Basically, removing regular 95 fuel from the pumps will allow the cost of gasohol to float. The extra cost of the fuel will be picked up by us, the motorists. In my last article on gasohol I was supportive of it. Ultimately my personal decision to use gasohol comes down cost. The environmental advantage of 1:9 blends is minimal, particularly given that you actually use slightly more fuel, but the cost difference is significant.

14 months from now when gasohol stands alone, we will not be able to recognize that we are paying a premium. Thai Oil and other ethanol producers will be afforded more leeway in production costs, because there will be no direct competition.

But... no choice

When all is said and done, we have no choice. And in the long term gasohol/ethanol is Thailand's best solution.

However, this lack of choice also concerns me.