Desperate times call for desperate measures, and for Asian governments it’s time to act rather than wait for oil prices to cool, reports Platts.
Oil prices are a big concern
After shelling out more than $100/b for months, Asia’s leading oil importing nations are running out of patience and are either slashing taxes or providing subsidies on fuels to ensure consumption does not suffer yet again.
Asian governments had hoped the sharp rise in crude prices following the start of the Russia-Ukraine conflict in March would be short-lived, but now they are convinced the price surge was not just a knee-jerk reaction. The recourse to various fiscal steps relay their strong belief that expensive oil is not going away anytime soon.
According to Platts Analytics, Dated Brent prices are expected to average $103/b in 2022, up from $71/b in 2021, before easing to $90/b in 2023. Now, Asian government are formulating policies to battle oil-led inflation in the hope that it’s better late than never
While some Asian countries, such as India, are reluctantly giving up some revenue by slashing taxes on fuels, other countries, such as South Korea, are shelling out subsidies to ensure the recovery in oil demand the region is witness after two painful years due to the pandemic stays intact.
“Oil prices are a big concern for the [Indian] government and the economy now because of its cascading effect,” said Dharmakirti Joshi, chief economist at CRISIL, a unit of S&P Global.
Policy makers are spending sleepless nights in India, where inflation, based on CPI, has risen consistently for the past seven months, reaching an eight-year high of 7.8% in April.
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Source: Platts
