Lower oil prices hurting China and Southeast Asia
The coronavirus pandemic has squeezed global demand. Sales by Chinese refineries dropped by 20 per cent. Non-tax revenue could drop to US.7 billion in Indonesia. Malaysia could lose up to US.8 billion. Vietnam, Thailand, Singapore and Brunei are also expected to suffer financially.
Hong Kong (AsiaNews) – The drop in oil prices to historic lows has not only affected the big Mideast producers, Russia and the United States, but also China and some Southeast Asian countries.
Falling prices have not benefited Asia’s big energy users since confinement measures and economic lockdown to combat the coronavirus have reduced consumption.
Chinese energy companies, especially large refineries, have taken a hit. The same goes for Indonesia, Brunei, Malaysia, Thailand, Singapore and Vietnam, which depend heavily on the tax revenues from the sale of crude oil and refined products.
The Global benchmark Brent, used in global trade, is around US a barrel today. Before the pandemic crisis, it was above US.
The decision by the Organisation of Petroleum Exporting Countries (OPEC) and other major producers, including Russia, to cut output by about 10 million barrels a day has not stopped the slide towards lower prices.
Although China is the world's largest importer of oil and gas, it is also the world's fifth largest crude oil producer and a major refiner. According to its State Council (government cabinet), sales of refined products by state-owned companies fell by 20 per cent between January and March.
Southeast Asia’s largest oil producer, Indonesia, expects its non-tax state revenue from the oil and gas industry to drop by more than half to US.7 billion. Malaysia is facing about 16.5 billion ringgits (US.8 billion) in potential losses from oil-related revenue for 2020, mainly from petroleum income tax.
With oil at US a barrel, state-owned PetroVietnam expects revenue to drop by VNĐ55 trillion (US.36 billion) this year. In Thailand, six refineries have seen a total Bt10 billion wiped off the value of their oil in the first quarter of the year.
Singapore, another major crude oil refiner, has seen output reduced by 10 to 30 per cent. Brunei is under pressure from falling prices: oil and gas revenue represent two thirds of GDP.
The future does not look rosy. Asian oil producers and refiners fear that even if the global economy picks up in the second quarter of the year, they will struggle to recover quickly.