Singapore (AsiaNews/Agencies) Oil on Asian markets has passed the US$ 64 mark over security worries in the Middle East and supply concerns in the United States.
Late this morning, the New York Mercantile Exchange's (Nymex) main contract, light sweet crude for delivery in September, reached US .08 a barrel, up 14 cents from its close of US$ 63.94 in the United States on Monday.
Continued strong demand in the US, which is in the midst of its summer driving season and is rebuilding its strategic reserves, along with renewed worries of a terrorist attack in Saudi Arabia, the world's biggest crude exporter producing about 9.5 million barrels per day, were combining to push prices to higher levels.
Saudi Arabia appears particularly vulnerable after two years of al-Qaeda attacks. Following credible British reports that terrorists are in the final phase of an attack, the US closed its embassy and consulates in the desert kingdom. Similarly, there are fears that US refineries might be the target of terrorist attacks or sabotage.
Adjusted for inflation, prices however remain far below levels reached in the wake of the 1979 Iranian revolution when prices surged to upwards of US a barrel in today's money.
Other analysts point the finger instead at emotions and speculation rather than structural factors to explain the recent upsurge in prices. They point out that there is still a margin to increase productionthe Saudis could raise output by 1.5 million barrels a day, whilst other oil producers like Iran are not at full capacity for political reasons.
What is clear is that price rises are disproportionately affecting emerging Asian markets. Economic growth in East Asia, including China, South Korea, Indonesia and the Philippines, will slow down this year due to a deteriorating external environment and continued oil price hikes, an Asian Development Bank (ADB) report said. The ADB had forecast that, East Asia's gross domestic product (GDP) growth would average 6.8 percent in 2005, down from 7.6 percent in 2004
High global oil prices are putting Indonesia's fiscal stability teetering on a tightrope. Finance Minister Jusuf Anwar said last week that the government will spend some Rp 112 trillion (US$ 2.58 billion) by the end of the year in private fuel subsidies instead of the expected Rp 76.5 trillion (1.76 billion).
"The source of all our fiscal troubles is this factor of soaring oil prices," Jusuf said when oil was still at US$ 62 a barrel.
China is also concerned about the current upward trend. As the second largest oil consumer in the world after the US, China's economy is vulnerable when prices pass the US$ 60 per barrel.
And things might get trickier when the government's decision to remove price caps on oil and fuels is implemented. The caps had been in place since 2000 to spare the Chinese economy jolts caused by oil price fluctuations.
Dong Xiucheng, professor at the China Petroleum University, expects prices to jump when caps are removed, but thinks the step is necessary to improve efficiencies and reduce consumption. (PB)