He said the present level of car ownership in the city was not expected to be much higher than the 5.7 per cent of the population cited by the World Bank in 1999. An insignificant manufacturing sector and a relatively low dependence on oil by local businesses also meant that Hong Kong was likely to suffer only a 'small impact to its GDP'. Inflation might creep up by 'a few tenths of a percentage point'.

Even if the price of crude tops US$60 a barrel, as some speculators believe, Mr Simpfendorfer said Hong Kong's real economic growth this year should still be within the government's forecast of between 4.5 per cent and 5.5 per cent.

For Hong Kong manufacturers and exporters who rely on trade with the US, however, the spectre of high oil prices pushing up the cost of plastic and dampening US consumer spending could have serious economic repercussions.

David Yip Yun-kuen, president of the Toy Manufacturers Association of Hong Kong, warned that factories would be forced to accept fewer or smaller orders if the price of crude surged past US$60. They would also be faced with higher freight and energy costs.

However, Mr Yip does not expect the situation to result in any factory closures in the short term. 'They will just have to take the higher prices one year at a time,' he said.

Rickly Wong Wai-ki, sales director at Universal Plastic & Metal Manufacturing, said it was difficult to pass volatile oil prices on to customers through constant cost adjustments. This time last year, the manufacturer of plastic products such as bags, gloves, aprons, shower caps and raincoats, paid US$970 per tonne for low-density polyethylene. Today, the price has gone up to almost US$1,300, an increase of more than one-third. Plastic accounts for 50 per cent to 60 per cent of the company's total product costs.

'When plastic costs were more stable, we were able to maintain our order prices for up to a year for regular customers. Now, we can only maintain prices for two to three months at a time before adjusting them,' Mr Wong said. 'We need to adjust our product prices based on the order.'

Toy manufacturers did not enjoy such flexibility, Mr Yip said, as prices were usually adjusted towards the end of each year, during the Christmas shopping season. As a result, surges in the price of crude that occur in the middle of the year were more difficult to pass on and might not be fully covered.

Consumer goods giant Procter & Gamble also said that a worsening oil crisis might force it to seek alternatives to the crude oil byproducts used in its manufacturing process. The company sells everything from cosmetics to cleansing agents.