Crude oil prices around $60 to $70 a barrel for the next six months will have little direct impact on the Japanese economy, but look out for indirect hits if higher prices hurt consumption in the U.S., economists say.
Hurricane Katrina, moving through oil production sites in the Gulf of Mexico, put pressure on oil prices Monday, with prices rising above $70 a barrel.
But even if such price levels are sustained, the direct impact is likely to be muted for Japan, which gets more gross domestic product from energy consumption than any other country, said Yasunari Ueno, chief market economist at Mizuho Securities Co.
“There’s no doubt higher oil prices will shift wealth away from industrialized countries, including the U.S., a net importer,” he said. “That would hurt Japan, but it’s harder to say how large that impact would be.”
Simulations show Japan’s GDP falling by as much as 0.5 percent should high oil prices trigger slowdowns in China and the U.S. — its two largest trading partners.
U.S. oil price rises are hurting exporter stocks like electronics and automakers, according to Hiroichi Nishi, product manager at Nikko Cordial Securities Inc. He added, however, that car manufacturers may see boosted sales of fuel-efficient cars in the U.S.
Overall, however, analysts here were not worried about the short- to medium-term impact of high oil prices, noting that so far record prices the past few months have left global growth largely unscathed.
Global consumption, led by the U.S., remains strong on booming real estate markets and cheap products from Asia. Meanwhile, interest rates overall are at record lows worldwide, stimulating spending, say Bank of Japan officials who downplay the effects of oil prices.
“Economic growth is always accompanied by cost. That cost now is rising oil prices,” Nikko Cordial’s Nishi said. “Conversely, oil prices will stop rising when the global economy slows down.”
According to a forecast by Masahisa Naito of the Institute of Energy Economics, Japan, global primary energy consumption will increase by 150 percent from 9.1 tons of energy in 2000 to 13.6 tons in 2020, with growth in Asia causing 50 percent of that rise.
JAL fares going up
Japan Airlines plans to raise fares on its domestic routes possibly in January next year because of rising fuel costs, JAL President Toshiyuki Shinmachi said Monday.
Higher fuel costs brought on by record crude oil prices are “far beyond our self-help efforts,” Shinmachi told a news conference. “We have started practical studies to raise fares.”
The hike is expected to be around 200 yen to 300 yen, the same margin as in the previous round of fare increases in January.
JAL has projected a fuel cost increase of 45 billion yen for fiscal 2005 to next March 31.
But Shinmachi said JAL may face an additional fuel cost rise of more than 10 billion yen. He also indicated the airline may raise international fares following hikes in July.
Nippon Oil price hike
Nippon Oil Corp., Japan’s largest oil distributor, said it will raise wholesale gasoline and diesel oil prices by 2.3 yen per liter on Thursday, citing a record-breaking rise in crude oil prices.
Three other major oil distributors — Idemitsu Kosan Co., Cosmo Oil Co. and Japan Energy Corp. — said last week they will hike September gasoline and diesel oil prices by about 2 yen.
With the planned hikes by the four major oil distributors, the average retail gasoline price is expected to top 130 yen per liter in September for the first time in more than a decade. The average price in August stood at 129 yen.
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