SINGAPORE — What a roller-coaster ride! It took more than four years for oil to go from $35 per barrel in 2004 to just above $147 in July 2008, and less than six months to go all the way down again. Today, the oil price is two-thirds lower than its peak last year, despite Israeli military strikes in Gaza that have raised concerns about the disruption of Middle East supplies.

Although these concerns helped drive benchmark prices for oil more than 20 percent higher last week, it is the underlying fall in demand for oil, triggered by the global economic slump, that sent prices tumbling and may keep them down for much of this year, despite efforts by leading exporters to cut production.

Who are the winners and losers?

Asian oil importers, from China and Japan to Singapore, are among the biggest beneficiaries of the collapse in prices. The Organization of Petroleum Exporting Countries, which controls about 40 percent of world oil production, stands to earn $444 billion from its exports this year, down from an estimated $962 billion in 2008, according to a U.S. government estimate. Much of that revenue loss will be transferred as financial gains to Asia in the form of lower oil import bills.

Overall, Asia imports from outside the region about 66 percent of the oil it consumes, and around 83 percent of these imports come from the Middle East. By comparison, the Middle East accounts for just 20 percent of U.S. oil imports and 27 percent of Europe’s oil imports.

Japan, the world’s second-largest economy after the U.S., imports all its oil and 89 percent comes from the Middle East, defined as the OPEC Gulf oil exporters plus Oman and Yemen. Asia’s two emerging giants, China and India, are also heavily reliant on Middle East oil, India for some 70 percent of its imports and China for 50 percent. South Korea, Taiwan, Thailand and the Philippines each depend on the Persian Gulf for more than 70 percent of their oil imports.

Singapore — a regional oil trading, refining and petrochemical hub — buys around 80 percent of its oil from the Middle East.

No one is suggesting that the savings on oil bills will offset other effects of the recession, including steep falls in exports, industrial production and employment. But it will help to cushion the impact. Lower energy prices leave households and businesses with more money to spend on other goods and services.

Indonesia, which has withdrawn from OPEC since becoming a net oil importer, used the fall in oil prices to cut subsidized fuel prices twice last month and plans a third cut later this month. Although domestic prices for petrol and diesel are still low by global standards, Indonesia’s Finance Minister Sri Mulyani Indrawati justifies the move as a way to support economic growth and shield the poor in the world’s fourth most populous nation.

Of course, the surge in prices for energy and food in the first half of last year helped oil and food exporters in Asia, including Malaysia, Thailand and Vietnam. They are among the losers from the price collapse since then. Yet, the World Bank noted in its latest assessment of the economic outlook for East Asia, issued in December, that “in all cases, declining oil and food prices will help lower inflation, and reverse some of the adverse effects on living standards that occurred in 2007 and early 2008.”

The financial boost from lower energy prices for major fossil fuel users in Asia and elsewhere is potentially huge, although the size of the stimulus will depend on how long the price of oil and of gas, which is linked to it, stay low.

By one calculation, the plunge in energy prices represents a $130 billion boost to real household incomes in the United States, compared with February 2007 prices. By another, the boost would amount to almost $730 billion over two years if the petrol price in the U.S. remained where it is today, at well under $2 per gallon (3.8 liters), compared to more than $4 per gallon last summer. And this does not factor in the savings in diesel, oil-related products, natural gas and coal for truck transport, airlines, petrochemical companies, utilities and other industries.

There is a catch. The Financial Times recently described the oil price plunge as “a dangerously addictive painkiller,” pointing out that short-term relief was being provided at a cost of serious long-term harm. The plunge, combined with the credit squeeze, is causing postponement and cancellation of investment in oil exploration, production, refining and alternative energy, setting the stage for a supply crunch later on.

Oil minister Ali Naimi of Saudi Arabia, the world’s biggest producer, warned recently that an oil price of $75 per barrel was needed to sustain investment in both conventional production and development of alternatives. He added that low prices were “wreaking havoc on the industry and threatening current and planned investments.”

A few days later, Fatih Birol, chief economist at the International Energy Agency, predicted that oil prices might rebound to around $100 per barrel between 2010 and 2015. “Demand will pick up when the world economy starts recovering,” he said. “Because oil supply will be limited due to today’s postponed investments, a serious supply-demand problem will emerge in 2010.”

The IEA has said if business as usual resumes, global demand for oil will rise from 85 million barrels per day in 2007 to 106 million bpd in 2030, requiring cumulative investment of more than $26 trillion in energy infrastructure. All of this projected increase in demand will come from developing countries — over 80 percent from China, India and the Mideast (where domestic oil consumption is on the rise.)

Amid the pressures of trying to cope with deepening recession, it is difficult for policymakers in many Asian countries to think beyond immediate problems and short-term fixes. With oil cheap and supplies seemingly plentiful again, it is also politically unpopular to mandate energy efficiency and an end to subsidies. However, this is the medicine that may be required as early as next year if oil prices start a sustained rally.

Michael Richardson is a visiting senior research fellow at the Institute of Southeast Asian Studies in Singapore.

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