Oil prices would increase, affecting the consumer price index (CPI), if the Strait of Hormuz is closed, even though less than 20 percent of Taiwan’s oil and gas imports pass through the strait, Minister of Economic Affairs J.W. Kuo (郭智輝) said today.
Iran has threatened to close the strait in retaliation against US airstrikes on Iranian nuclear facilities.
At a meeting of the legislature's Economics Committee, Chinese Nationalist Party (KMT) Legislator Yang Chiung-ying (楊瓊瓔) asked Kuo how a blockaded Strait of Hormuz would affect Taiwan and whether the Ministry of Economic Affairs has countermeasures in place.
Photo: Chang Yi-cheng, Taipei Times
The ministry has been tracking the issue since last week, made several predictive models and obtained price information from the market, Kuo said.
Although less than 20 percent of Taiwan’s imported oil and gas passes through the strait, there could be ramifications for oil prices, he said.
If the strait were to be closed off, ships would be forced to take longer alternative routes, he said.
Asked if this meant crude oil prices would increase, Kuo said: “Of course.”
However, he added that the ministry would carefully evaluate all of its models and potential strategies.
In response to concerns about the effect of rising oil prices on CPI, a measure of inflation, Kuo said that a 10 percent increase in oil prices would lead to a 0.3 percent increase in CPI.
A 1 percent increase in electricity prices would raise CPI by about 0.027 percent, he added.
Taiwan People's Party Legislator Chang Chi-kai (張啓楷) asked about the conflict’s effect on the stock market and how the ministry would respond after the TAIEX fell 400 points in early trading today.
CPC Corp, Taiwan (CPC, 台灣中油) has put together a series of strategic responses based on crude oil prices increasing by as much as US$130 per barrel, while also taking into account the CPI, Kuo said.
Meanwhile, the Executive Yuan said in a statement that Vice Premier Cheng Li-chiun (鄭麗君) has ordered the Cabinet's price stabilization task force to monitor possible fluctuations in oil prices and consumer goods.
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