Oil prices weigh on inflation
By Zhang Fengming |
March 15, 2011, Tuesday
|
Print Edition
Print Edition
JAPAN'S devastating earthquake last week could lead to volatile oil prices that may have a bearing on China's inflation.
"The explosion and shutdown of nuclear power plants would increase Japan's demand for fossil fuels or coal in the near term," David Leung, general manager of wealth management at Standard Chartered Bank China, said yesterday.
The bank raised its quarterly oil price forecast to US$105, US$115, US$115 and US$110 a barrel for the four quarters of this year, from the previous forecast of US$100, US$97, US$95 and US$97.
The Royal Bank of Scotland projected a short-term drop but saw prices rising for the long term due to the quake.
"In the short term, Japan's demand for oil may decline as some economic activities may halt," said RBS's Danny Huang. "But as it starts to reconstruct and economic activities resume, this will drive demand for energy higher."
Citibank economists yesterday said it is unclear of the quake's impact on oil prices in the long term, but a short-term volatility is definitely projected.
"What is clear that the near-term volatility in the global oil market will continue alongside the Middle East and North Africa crisis," Citibank said in a note.
The oil price volatility is likely to impact China's economic development and inflation.
China is targeting an annual inflation rate of 4 percent and economic growth of 8 percent this year. Higher oil prices will increase inflationary pressure by raising transport costs, for example.
They could also dent economic momentum as production costs climb. China has already prioritized combatting inflation in its government work agenda this year. The Consumer Price Index, the main gauge of inflation, rose 4.9 percent in February, the same rate as in January.
RBS said a weaker Japanese recovery may have short-term impact on China's export growth but limited damage in the medium term.
"The explosion and shutdown of nuclear power plants would increase Japan's demand for fossil fuels or coal in the near term," David Leung, general manager of wealth management at Standard Chartered Bank China, said yesterday.
The bank raised its quarterly oil price forecast to US$105, US$115, US$115 and US$110 a barrel for the four quarters of this year, from the previous forecast of US$100, US$97, US$95 and US$97.
The Royal Bank of Scotland projected a short-term drop but saw prices rising for the long term due to the quake.
"In the short term, Japan's demand for oil may decline as some economic activities may halt," said RBS's Danny Huang. "But as it starts to reconstruct and economic activities resume, this will drive demand for energy higher."
Citibank economists yesterday said it is unclear of the quake's impact on oil prices in the long term, but a short-term volatility is definitely projected.
"What is clear that the near-term volatility in the global oil market will continue alongside the Middle East and North Africa crisis," Citibank said in a note.
The oil price volatility is likely to impact China's economic development and inflation.
China is targeting an annual inflation rate of 4 percent and economic growth of 8 percent this year. Higher oil prices will increase inflationary pressure by raising transport costs, for example.
They could also dent economic momentum as production costs climb. China has already prioritized combatting inflation in its government work agenda this year. The Consumer Price Index, the main gauge of inflation, rose 4.9 percent in February, the same rate as in January.
RBS said a weaker Japanese recovery may have short-term impact on China's export growth but limited damage in the medium term.
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