Surging oil prices could curb Asia's economies, with some analysts predicting the fast-growing region -- heavily dependent on oil imports -- could slip into a recession if prices don't recede.
With oil prices about 50 percent higher than a year ago, the warnings are starting to mount.
South Korea's central bank said higher crude prices could shave 0.7 percentage points off economic growth this year and raise consumer prices. The Philippines has warned of a "heavy toll." Officials in Japan, the world's No. 1 oil importer, and Malaysia are voicing concerns.
After rising to a record close of US$60.54 a barrel on Monday, crude oil prices fell back some, granting the region's importers a reprieve. In Asian trading yesterday, light, sweet crude for August delivery was down a cent at US$58.19 a barrel on the New York Mercantile Exchange, but traders said prices could easily test the US$60 mark again.
Rob Subbaraman, an economist at Lehman Brothers in Tokyo, and his colleagues lowered their growth forecast for Asian economies excluding Japan this year to 6.3 percent from 6.7 percent -- but dismissed the idea of a serious slump across Asia.
"We expect a bigger impact from higher prices this year than last year," Subbaraman said. "We are not close to forecasting a recession for the region.''
Asia's heavy reliance on oil imports, mostly from the Middle East, means higher crude prices quickly translate into higher costs for a wide range of companies, from airlines and steelmakers to computer makers and fisheries. Consumers will also have to divert more of their spending to cover higher utility and gasoline bills. The overall effect could seriously restrain economic growth.
Also, Asian oil consumers have had to pay slightly higher prices because there is less competition among suppliers than in other parts of the world. This so-called "Asian premium"can run as high as US$1.50 a barrel.
"There may be a gradual indirect effect on the Japanese economy,"Japanese Chief Cabinet Secretary Hiroyuki Hosoda, the top government spokesman, said recently about the oil price hikes. "We are worried there may be a major negative impact on the world economy.''
Japan's suffering from past oil crises has forced it to become more fuel-efficient, with factories making fuel conservation a priority to lower production costs and consumer-electronics manufacturers hyping the energy-saving merits of their air conditioners, refrigerators and washing machines.
China, however, is cushioned by its state-owned oil companies from most swings in world oil prices. Suppliers often hold prices steady amid fluctuating world markets, taking smaller profits when import costs rise and making it losses with fatter margins when costs fall.
Also, China produces a lot of its own oil, making the impact of shifts in world prices smaller than in such places as South Korea or Japan. Retail fuel prices change so rarely that an increase in diesel prices by the government announced this week was treated as major news in state-controlled media.
In India, where the market is also dominated by state-run oil companies, the government has so far absorbed much of the impact of the price rise, but a 2.5-rupee (US$0.05) increase in gasoline prices per liter this month has provoked protests across the country.
"The impact depends entirely on how much is passed on to consumers. In 1999, when something similar happened, the impact on growth was quite significant,"said Abheek Barua, ABN AMRO chief economist in Mumbai.
Higher oil is having a negative effect on some traditional lines of work, such as fishing in New Zealand. In Nelson, a port on the country's South Island 145km west of the capital Wellington, soaring oil prices are being blamed for fishermen quitting the industry.
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