Thailand has adopted policies that promote the use of biofuel produced from
local crops to reduce the country’s dependence on imported fossil fuel. The pricing
policy was designed to encourage greater use in the transportation sector of gasohol,
which is a blend of gasoline and ethanol. It consists of two measures, namely, a
subsidy on gasohol and a tax on gasoline. Their effect was to make gasohol price
lower than that of gasoline so that motorists might use more gasohol, which is a
substitute to gasoline. However, the economic impact of the measures was welfare
loss and inefficiency, which was the result of the increasing difference between the
MRS and MRT of both products as gasohol consumption increased. In this regard, the
influence of households’ socio-economic characteristics and other factors on vehicle
fuel consumption and the impacts of the existing pricing policy were examined so that
an alternative pricing policy that should lead to the highest efficiency of both fuels
and increase gasohol consumption with the least cost could be proposed in this study.
To address these two research questions the study was divided into two parts: first, a
micro-analytic empirical approach was used to investigate vehicle fuel demand
patterns of households, which cannot be revealed by macro-data. The complete
demand analysis based on micro level data was then carried out to assess the effects
of price and non-price factors, deriving results of demand elasticities for each vehicle
fuel items, particularly E10-gasohol and gasoline.