Minister of Economic Affairs J.W. Kuo (郭智輝) yesterday said that if domestic fuel costs rise 10 percent due to a potential closure of the Strait of Hormuz amid rising Middle East tensions, it could push up the nation’s consumer price index (CPI) by 0.3 percentage points.
Imported crude oil and natural gas shipped to Taiwan via the Strait of Hormuz account for less than 20 percent of total imports, Kuo told a meeting of the legislature’s Economics Committee in Taipei.
However, if the vital waterway were blocked, ships would need to reroute, potentially delaying deliveries, and driving up international oil prices and domestic fuel costs, he said.
Photo: Fang Pin-chao, Taipei Times
The minister’s remarks came after Iran’s parliament yesterday approved a measure backing the closure of the Strait of Hormuz after US airstrikes on Tehran’s nuclear facilities.
Kuo said the ministry has been closely monitoring the situation in the Middle East since last week and has countermeasures ready should crude oil prices rise to US$100, US$120 or even US$140 per barrel, from about US$80 per barrel.
The ministry has developed a calculation module that would handle the situation cautiously if Iran were to close the waterway, Kuo said.
Asked by KMT Legislator Cheng Cheng-chien (鄭正鈐) about the impact of rising oil prices on the CPI, Kuo said that a 10 percent increase in oil prices would raise the CPI by 0.3 percentage points, while a 1 percent rise in electricity prices would lift the CPI by about 0.027 points.
Nevertheless, Kuo said he believes the Executive Yuan would maintain the existing mechanism to keep domestic fuel prices the lowest among neighboring Asian nations.
State-run CPC Corp, Taiwan (台灣中油) yesterday said that amid rising geopolitical tensions in the Middle East, it has adopted a risk diversification strategy by sourcing crude oil and liquefied natural gas from multiple nations, while its fuel reserves meet regulatory safety requirements and can ensure stable domestic supply.
The company would closely monitor developments in the Middle East and follow government policies to stabilize prices amid fluctuations in global oil and gas prices, CPC said in a statement.
Imported crude oil from the Middle East accounted for 39 percent of CPC’s total oil imports last year, mainly from Saudi Arabia and the United Arab Emirates, with shipments loaded and departing from the Persian Gulf, a CPC official told the Taipei Times by telephone on condition of anonymity.
About 25 percent of CPC’s imported natural gas came from Qatar, with both oil and gas shipments inevitably passing through the Strait of Hormuz, the official said.
To cope with the latest developments in the Middle East, CPC plans to procure oil and gasoline from other regions in the short term, adjust its refined oil export plans based on the situation and ask its liquefied natural gas suppliers to boost supply, the company said.
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