Asia braces for fallout as China and Europe face energy crunch
- Businesses and consumers are grappling with the higher costs of utilities, petrol, and raw materials
- Coal is being mooted as a short-term option, but analysts say falling back on it will threaten the region’s climate goals
Even though electricity bills only account for a fraction of costs for the firm, which supplies parts to electronics giants Samsung and LG, Oh has already felt the effects of skyrocketing oil prices. The price of transport and raw materials such as plastics – which are derived from oil, gas, or coal – have risen by 5 to 10 per cent.
“I’m quite worried about rising costs of materials,” he told This Week in Asia. “We plan to cut down on other costs and enhance productivity to cope with rising oil costs.”
Crude oil prices have surged dramatically in recent weeks, partly fuelled by a boom in economic activity as countries bounce back from the pandemic. Brent oil – the international benchmark – hit US$80 a barrel on Tuesday, a three-year high.
A reduction in drilling activity by shale producers and supply disruptions have driven up prices of natural gas, which is used to heat homes during winter and power factories. With a concurrent shortage of coal, all signs are pointing to a looming energy crisis.
Asia will not be spared the fallout. Howie Lee, an economist at Singapore’s OCBC Bank, said the energy crunch was “set to have a rippling effect across the world, as countries grapple with higher input costs”, and noted that most countries in the region were dependent on imports of oil, gas, and other refined products.