Asia feels pinch of high oil costs, but so far averts crisis

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Asia feels pinch of high oil costs, but so far averts crisis

By Thomas Wagner, Associated Press, 10/1/2000

OKYO - In South Korea, signs of the world's oil price shock are everywhere: Elevators now stop only at every other floor, and the country's popular bathhouses have been ordered closed one day a week to save energy.

This month, the country, which imports all its oil, is raising home electric prices from 20 percent to 50 percent.

Apartment managers have told residents to turn off their lights at night, and some bus drivers are threatening to strike over a 17.5 percent increase in diesel fuel prices.

Still, Asia has seen nothing as dramatic as the oil price protests that blocked highways across Europe, or the US decision to release 30 million barrels of oil from its emergency stockpile.

While Asia remains concerned about the impact of high oil prices, there is no crisis yet.

''Many economists aren't lowering their strong economic growth forecasts for Asia yet because the region continued to do well during the first half of this year, even after oil prices doubled,'' said Tim Condon, chief Asia economist for ING Barings in Hong Kong.

''But if prices continue to rise, creating a true oil price shock, that would really cause people to change their views of these economies,'' he said.

-- Carl Jenkins (Somewherepress@aol.com), October 01, 2000

Answers

And here's the rest of the story and the link:

In Asia, which relies heavily on imported oil, high oil prices have rattled many stock and currency markets, helping drive some to record lows.

Consumers are grumbling about rising gasoline and other energy prices in South Korea, China, Thailand, Philippines, Hong Kong, Australia, and Pakistan. Those affected include everyone from taxi and rickshaw drivers, to fishermen and farmers, to poor people who cook with kerosene. Scattered protests have occurred in Australia, Thailand, Philippines, and Cambodia.

The International Monetary Fund and some economists have warned that if the steep oil prices continue they could slow Asia's strong recovery from the 1997-98 financial crisis.

Asian countries that rely on exports could be hard hit if heavy use of home heating oil in the West this winter drives oil prices up further and reduces consumer spending in the United States and Europe, on everything from sneakers to computer software.

But so far, oil prices haven't put a dent in the West's demand for Asia's electronics and information technology goods. In August, export orders in Taiwan rose 25 percent; the increase was the 10th straight monthly double-digit gain.

The Asian Development Bank recently raised its projection for economic growth in the region's developing countries this year, to 6.9 percent from its prediction of 6.2 percent. The new figure assumes that oil prices will hold at around $30 a barrel.

-- Carl Jenkins (Somewherepress@aol.com), October 01, 2000.


And Finally (The GICC is experiencing tech problems):

Not counting Japan, Australia, and New Zealand, growth in the developing economies of Asia and the Pacific reached 6.2 percent in 1999, according to the Asian Development Bank. It said Asia's recovery is less vulnerable to reversal because it now relies on improved consumer spending as well as exports.

Japan, the world's second-largest economy, is expected to grow about 1.5 percent in 2000, and 2 percent in 2001. That would be the highest growth rates in Japan since 1996.

South Korea's GDP growth of 10.7 percent in 1999 was followed by 12.8 percent growth in the first quarter this year and 9.6 percent in the second quarter.

Better still, the three oil exporters in Asia - Indonesia, Malaysia, and Brunei - are benefiting from higher oil prices. Indonesia, the region's only OPEC member, is expected to see its economy grow by 4 percent this year, supported by firm oil prices, according to an IMF report.

''The high oil prices are helping Indonesia a lot,'' said Song Seng Wun, vice president of regional economics at GK Goh Research in Singapore. ''There is a $300 million net profit for Indonesia each time there is a $1 increase in the oil price.''

So far, the effect on consumers has varied widely in Asia.

Japan's strong currency, the yen, is offsetting the effect of the higher oil prices. The country has sharply reduced its dependence on imported oil by making more efficient use of fuel and switching to alternative energy sources, such as nuclear power.

Gasoline prices have always been high in Japan, but price-cutting battles among retailers have kept price increases to a minimum. Premium unleaded gasoline has risen from $3.75 a gallon to $4.04 a gallon this year.

China also is partly shielded from the surge in oil prices because it burns a lot of domestically produced coal. It produces more oil and oil-related products than the amount of barrels it imports, meaning the rising oil prices are a boon to its oil companies.

Gas prices have risen as much as 50 percent in Beijing in the last year, putting them on par with those in the United States. The city responded by allowing cab drivers to raise fares about 25 percent.

''It's not enough,'' said one cab driver, who gave his family name as Sun. ''After paying for all the costs of my cab, I have nothing left over.''

This story ran on page A30 of the Boston Globe on 10/1/2000.

) Copyright 2000 Globe Newspaper Company. http://www.boston.com/dailyglobe2/275/nation/Asia_feels_pinch_of_high_ oil_costs_but_so_far_averts_crisis+.shtml

-- Carl Jenkins (Somewherepress@aol.com), October 01, 2000.


I notice that South Korea's GDP is creeping lower now, from a very high level. And, when you get to a point, energy-wise, where the elevators stop only every other floor, well, do I have to paint a picture?

I think these analysts are wrong, and when the energy shock really hits, it wlll hit suddenly, and with a thundering impact that will surprise them all.

-- Billiver (billiver@aol.com), October 01, 2000.


I lump this story in with other feel-good, oil-prices-aint-nuthin-to-worry-about articles I've seen lately. It's as if some people think if they say it often enough, it will be true. A lot of financial whizes are whistling past the graveyard right now. While we've all been looking toward Europe and the protests there, the real story may well be the impact on Japan, Korea, and the rest of Asia.

-- Cash (cash@andcarry.com), October 01, 2000.

Speaking of aversion, I, too, feel that I have averted a crisis - by not listening to the oil-ain't-nuthin' crowd any more. I suppose these people think natural gas is a figment of our imagination too.

Man, are they all going to be surprised. My guess would be, beyond belief.

-- Wayward (wayward@webtv.net), October 01, 2000.



Did you note the reference to Taiwan, having double digit increases in export orders for electronics and IT products each month for the past ten months?

Scary, scary. This is the setting up of a Boom or Bust business cycle if ever I heard one. The next sound you hear will be that of the air whistling out of the balloon. That would be, of course, the Bust half of the cycle.

-- Wellesey (wellesley@freeport.nt), October 01, 2000.


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