The Social Cost of Thailand's Transportation Fuel Pricing Policy

The price structure of Thailand's transportation fuels has always been heavily distorted by the government. The prices of diesel and biofuels are consistently subsidized, while the prices of other fuels are raised above their competitive level in order to provide cross-subsidies to diesel and biofuels. Price distortion in this fashion leads to over-/under-consumption of transportation fuels relative to the socially optimal level. This study estimates the economic and social cost of the price distortions within Thailand's transportation fuel market that stem from inecient price structure and cross subsidies.