The question is, for how much longer can the Thai economy withstand such onslaught before real damage is done, and whether the Bank of Thailand and the caretaker government have the wherewithal to guide the country through this gathering storm. The rising oil price on the international market is pushing the domestic retail prices of diesel and petrol ever closer to the psychological Bt30-per-litre level, at which point the prices of consumer goods are expected to skyrocket. Prices of food, essential goods and transport have already risen in tandem with the sustained upward trend of oil prices.

The government has no energy policy at all so far, reacting in a knee-jerk fashion every time the oil price spikes. It is now trying to find ways to intervene and ensure that fuel prices rise gradually rather than sharply with a view to cushioning consumers from the impact. It is good to know that the government's economic management team has agreed that reverting to oil subsidies is not an option, because that action would distort the market to the point where any short-term relief would be cancelled out by the country's loss of competitiveness.

Even without the external factors, Thailand already faces political uncertainty that, if prolonged, could begin to weigh on economic growth, previously projected at 5 per cent this year.

Economic fundamentals do not appear very encouraging either. Domestic demand has already shrunk because of political uncertainty, depressed confidence, rising real interest rates and high oil prices, which are now set to rise further.  Growth in private investment has already been revised down from 11 per cent to 9.5 per cent, as investors remain jittery about political uncertainty and external risk factors. Public investment does not look good either, with the expected growth for the year again revised down to 6.5 per cent, if not lower.

Foreign direct investment is expected to tank this year not only because of the delay in mega-projects but also because the prolonged political turmoil has compelled investors to postpone many plans.

For the time being, the Bank of Thailand and the caretaker government appear to be sitting back and allowing the baht to strengthen against the dollar, which seems to complement the bank's tightening of monetary policy to allow interest rates to rise gradually to offset inflationary pressures. Another windfall, albeit a short-term one, is the influx of foreign funds into the stock market.

Such a monetary policy carries a potentially high cost, yet it is the right course of action to remain vigilant against any upward pressure on prices. It would be very difficult to bring the situation back to normal if price rises were allowed to get out of control.

One positive aspect of the stronger baht is that it helps combat inflation. Importers can stock up on their raw materials, parts and components at cheaper prices. In dollar terms, oil prices have risen 20 per cent so far this year, while the baht has strengthened by about 8 per cent. In effect, the stronger baht has reduced inflation by almost half without any intervention.

One of the biggest risks is a US economic slowdown, which would deal a devastating blow to an export-led economy like Thailand's. At present, to maintain a growth rate of around 5 per cent, Thailand has to count on the export sector to register an exceptionally strong performance, which in turn hinges on the US, its biggest market, maintaining its economic expansion and voracious appetite for imports.

For the time being, the best strategy for Thailand is to learn to conserve energy and utilise all resources in a competitive way. We can't afford any waste in this climate of global volatility.