Asian governments forced to act as oil prices soar

Torn between protecting the poor and saving their budgets, governments across Asia are being forced to slash fuel subsidies as world oil prices smash through 130 dollars a barrel.

Indonesia, Malaysia and Taiwan have decided to wield the axe on multi-billion-dollar subsidies despite fears of unrest as inflation spikes and the region’s poor pay more for fuel on top of the surge in food costs.
Even regional giant India, which until last week was happy to see state oil companies lose millions of dollars a day selling discounted fuel, said Friday that a price hike was inevitable.

But while most price-setters could see the writing on the wall, China again dismissed rumours that it would change its central pricing system as it focused on containing inflation ahead of the Beijing Olympics.

“In Asia generally, those countries that subsidise oil will be under pressure to remove their subsidies while those that don’t will be under pressure to do something for low-income earners,” Royal Bank of Scotland economist Euben Paracuelles told AFP from Singapore.

The crude price boom means that Asian consumers are in for a shock as cash-strapped governments loosen price controls to rein in deficits and free funds for spending on health, education and infrastructure.

AFP