Asia Minute: Higher Oil Prices Could Complicate Asia’s Economic Picture
The price of Brent crude oil has hit its highest level in nearly a year and a half. If prices stay at that level or see further gains, there will be broad economic impacts—especially in Asia. HPR’s Bill Dorman has more in today’s Asia Minute.
Oil producers agreed this week to cut back on global supplies…which has had the immediate effect of pushing oil prices higher. The players are familiar on the supply side—the Organization of Petroleum Exporting Countries—OPEC—led by Saudi Arabia….and Russia. It’s the first time OPEC members have agreed on a production cut since 2008. For Russia, it’s the first production cutback in fifteen years….and the combination caught global markets by surprise.
No one consumes more oil than the United States, but the second and third leading consumers are China and India. And for those economies and some others in Asia, higher oil costs come with an extra penalty these days—the price of exchange rates.
Oil is priced in dollars…and the US currency has strengthened in recent weeks. That means the price of imported oil will rise further for China, India and other economies around the Asia Pacific—especially emerging economies—which have seen the biggest declines against the dollar. But the big question—and the uncertainty—is whether those higher oil prices will stick around. So far, global markets are showing a mixed opinion.