The New Nation - Internet Edition

ASIAN economies are feeling the pain of soaring energy costs. High oil prices

have had minimal impact in the past three years but it is less sanguine this time around, as an economist from Singapore remarked recently. Slowing economic growth, led by a sputtering US economy, will make it harder for consumers and companies to shrug off the pain of bigger transport fees and electricity bills. Unlike in the boom times of the past few years, wages and profits will be under downward pressure instead. While no one is pressing the panic button yet, caution is building up as the IMF has warned that surging energy costs could 'send the world into a recession.'

As crude prices are breaching all-time highs, alarm bells have started to sound over the relentless rise of oil. The ongoing run-up in the cost of crude, up 40 per cent so far this year and nine times 2000 prices, is reviving memories of the 1970s oil shocks. Oil prices rose fivefold between 1973 and 1980, ushering in a period of 'stagflation'-a dreaded combination of recession and high inflation. Oil prices eased earlier this month after exceeding $135 a barrel immediately before, but experts are of the opinion that this is probably 'a mere breather' before they resume their upward trajectory.

Asian economies, so far, have remained relatively robust but economists have warned that the region is a large net importer of oil and that 'inflation hits gross domestic product with a lag.' Consumers may have to tighten their belts as larger transport and electricity bills erode their spending power. Keeping pace with, companies may also scale down on investments as energy costs squeeze profit and besides transport companies, the energy-heavy manufacturers will be hurt the most.