Interesting article pasted below.
Unfortunate photo in CNN.com of a Father in Texas with his dead 10 year old next to a rolled explorer. Hard to believe some analysts were encouraging (bottomfishing) buying bridgestone a week or so ago. These guys should be behind bars.
As far as the weather they are projecting a rapid change here in NJ from 70's in the night to 40's.
September 5, 2000
Business and Finance - Asia
Asia May Be Hit Hardest
By a Surge in Oil Prices
By JON E. HILSENRATH
Staff Reporter of THE WALL STREET JOURNAL
Persistently high oil prices might pinch parts of Asia more than the rest of the world.
That's because the developed world, including Japan, has dramatically reduced its dependence on oil since the energy crises of the 1970s, while much of Asia remains as dependent as ever.
"The Asia-Pacific region has been the engine room of demand growth for petroleum products," says James Brown, an oil-industry analyst with Merrill Lynch in Hong Kong.
To put Asia's dependence in perspective, consider these statistics. Consumption of oil in South Korea rose by nearly 90% between 1990 and 1998, while it rose by just 9% in a booming U.S. economy. Oil consumption in Thailand rose by nearly 80% during that period; in the U.K. it fell.
Looked at another way, for every dollar of economic output it produces, Asia, excluding Japan and China, burns as much oil as it did 30 years ago, according to Geoffrey Barker, chief economist for HSBC Holdings PLC. By comparison, the U.S., Europe and Japan use 40%-50% less oil for every dollar of economic growth than they did when oil prices spiked in the 1970s, he says.
Asia's dependence on imported oil is coming back into focus, ahead of meetings on Sept. 10 of the Organization of Petroleum Exporting Countries in Vienna. Crude-oil prices have stubbornly stayed above $30 a barrel despite pledges by oil-producing countries to boost output. During the past 12 months, high oil prices have sparked protests and violence in some places, such as Thailand and the Philippines. On Sunday, a grenade exploded in a parking lot next to a Caltex Philippines gas station in a suburb of Manila. There were no casualties.
Join a discussion: How will oil prices affect economies in Asia?
The reasons for Asia's oil dependence are fairly straightforward. While Asia was rapidly industrializing during the past 30 years, and consumers were moving from bicycles and scooters to cars, the developed world was switching to alternative energy sources, such as nuclear power and natural gas, and it was moving to more fuel-efficient cars. But in Asia, some countries actually subsidize the politically sensitive cost of energy, and little progress has been made on switching to alternatives to oil.
"When Asia was making its rapid leap forward, oil prices were getting cheaper and cheaper," says Mr. Barker. "It wasn't a policy priority."
The exceptions in Asia are Japan and China, says Mr. Barker. Stung by the oil crises of the 1970s, Japan made a concerted effort to reduce its dependence on imported oil. Today, Mr. Barker says, it consumes 50% less for every dollar of economic output than it did 30 years ago. China, on the other hand, has long been more dependent on domestically produced coal, reducing its relative dependence on oil, though polluting its air in the process.
For the rest of Asia, high oil prices have both a direct and indirect impact. First, they raise the import bill of most Asian economies, except Indonesia and Malaysia, which are net exporters of the commodity. High oil prices are likely to raise Asia's collective import bill by about $20 billion in 2001, says Bill Belchere, a Merrill Lynch economist.
The indirect impact is that high oil prices could slow global economic growth and reduce Asia's exports, though Mr. Belchere notes that this impact is muted because the rest of the world is less dependent on oil than it used to be.
The combined impact reduces economic growth, puts downward pressure on currencies and makes it harder for central bankers to keep interest rates low.
Economists say the combined impact won't be enough to derail the region's economic recovery. But it is hurting. According to Merrill Lynch, the oil shock of the late 1970s cut Asia's growth rate in half. This time around, it could trim half a percentage point from regional growth next year, it says. But in some countries, the impact will be more severe. Mr. Belchere projects that growth in South Korea, Taiwan, Thailand and the Philippines will be shaved by one percentage point or more in 2001, due largely to higher import prices.
At some point, Asia's economies can be expected to go the way of the developed world, and reduce their dependence on oil. But "there is no sign of it yet," says Ian McCafferty, an economist with BP Amoco PLC in Lond |
