Governments across Asia are reviewing energy policies in response to high world prices for gasoline and diesel,taking steps that could curb demand and help bring down global prices in the months ahead.
India announced late Tuesday that it would cut subsidies by allowing state-owned oil companies to raise retail gasoline an diesel prices 7 percent immediately.Thai officials are putting the finishing touches this week on what PM Thaksin Shinawatra has promised will be a broad new policy of mandatory energy conservation.
China,Taiwan and Indonesia are all studying plans to cut subsidies and raise domestic prices for gasoline and diesel,while Pakistan went ahead and raised domestic prices on Thursday.
Energy subsidies were politically sacrosanct and little debated in Indonesia until this year.But Indonesia raised prices by more than 20 per cent on Thursday for all but the cheapest grade gasoline,which remains $ 1.57 a gallon,or 42 cents a litre.
Indonesia's Central bank cited the burden of those subsidies in announcing on Tuesday that it was raising interest rates by half a percentage point.The step was taken to stem a slump in the value of the Indoensian currency after energy subsidies exceeded a quarter of government spending this summer.
With the conspicuous exceptions of South Korea,Japan,Singapore and HOng Kong,most Asian government have long subsidized energy consumption,shielding their populations and industries from occasional spikes in world oil prices.The result has been startling inefficieny : China and India each consume up to five times as much energy as Japan to produce each dollar of economic output,according to the Asian Development Bank.
" In Asia,for a long time we have been in denial about the sustainability of high oil prices " said Ifzal Ali,the bank's chief economist " These subsidies are simply not sustainable."
Energy consumption has soared across Asia in the past decade as the region's gas-guzzling economies.especially China's and India' ,have expanded rapidly while holding prices down.As Asian energy users start paying much higher prices,they may reduce consumption,freeing up oil to beused elsewhere and allowing prices to drop,energy experts said.
Several big changes are making Asian governments more willing to review subsidies this year than during previous run-ups in oil prices.One of the changes is a spreading perception that
this year's price increases may prove more enduring than previous increases,driving up the cost of subsidies.
But another deeper change is the growing influence in Asia of publicly traded companies that are less willing than state-owned enterprises to accept losses on their refinery businesses.
Huge government-owned businesses like Sinopec in China have been partly privatized and have issued stock,making them more sensitive to investors' needs and less concerned about helping national governments hold down inflation by limiting increases in gasolin prices.At the same time,publicly traded companies like Reliance in India and Formosa Petrochemical in Taiwan have jumped into markets previously monopolized by government-run businesses.
Sinopec has been particularly outspoken in China over whether to deregulate gasoline and diesel prices at service stations in a debate that has spilled into the national media.
" We have to look at the prices of refined products in international markets " said a Sinopec spokesman,Evan Jia.
News reports on high gasoline prices in the United States after Hurricane Katrina have helped draw attention in Asia to prices in China of around $ 1.70 a gallon.Gasoline prices in the US are now averaging about $ 3.20 a gallon.
The Hurricane had little effect on wholesale prices in Asia because most Asian refineries use high-sulfur Dubai crude.And the price of Dubai crude has not moved up and down as much in response to the loss of lower-sulfure crude oil from Gulf Coast oil rigs and refineries.
The debate over government's role in insulating populations from high world energy prices has been particularly clear and visible through the past week in Taiwan,where Chinese Petroleum,a state-owned company,lost its monopoly on gasoline sales in 2000.Formosa Petrochemical,a publicly traded company controlled by Formosa Plastics Group,jumped into the market then and captured nearly a third of it,with Chinese Petroleum still holding the rest.
Until last week,both companies always moved on the same day in giving 10 days' notice to franchised dealers of an increase or decrease in the wholesale price the two companies charged for gasoline and diesel.But last Wednesday,Formosa Petrochemical notified dealers of a 9.7 percent increase,to take effect on Friday,and Chinese Petroleum did not follow suit.
Formosa Petrochemical is standing fast,despite strong criticism,including a Taipei Times cartoon that depicted the company as a gas station attendant shooting himself in the head with the nozzle of a gas pump.Lin Keh Yen,the director of the president's office at Formosa Petrochemical,said retail sales by franchised had already dropped by 20 per cent to 30 per cent as consumers shunned them in protest even though local gas dealers have not yet raised prices at the pump.
But,Lin said,Formosa Petrochemical is prepared to export fuel that Taiwanese buyers do not purchase " We are a listed company,we have to face our investors " he said.
Politicians across the political spectrum,including the opposition Nationalist Party,have supported the government's decision not to raise the wholesale prices charged by Chinese Petroleum ,while hoping that oil prices will continue the fall that began on Friday.
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