Do More With Reuters
Partner Services

ANALYSIS - In China, India, higher fuel prices not yet high enough

Thu Jul 2, 2009 6:05pm IST
 
Email | Print | | Single Page
[-] Text [+]

By Eadie Chen and Nidhi Verma

NEW DELHI/BEIJING (Reuters) - At some point, the theory goes, Chinese and Indian consumers will begin to feel the pain of rising fuel costs, adjusting their habits to use less gasoline, just as motorists from Japan to America have done.

But even after a pair of surprise prices hikes this week, taking Chinese pump rates to their highest ever and elevating the cost of gasoline well above relatively cheap American petrol, officials and analysts are agreed: we're not there yet.

The economic expansion of the world's two most populous nations underpins the base case for medium-term oil bulls who believe $70 a barrel is only the beginning, but the question of demand "elasticity" -- whether fuel use contracts in the face of higher prices -- could call those forecasts into question.

For the moment, however, that danger appears minimal, even after both countries upped pump prices by as much as 10 percent this week, moves that provoked shrugs rather than anguish even amid the worst global recession in decades.

"Even if oil prices double, it won't affect my driving at all," said 33-year-old Shi Yun, a Beijing local newspaper editor. "Fuel is only a tiny bit of my living expenses and my life wouldn't work without driving."

S. Behuria, chairman of Indian Oil Corp, India's top oil retailer, said any impact wouldn't last more than a day or two.

With car ownership soaring and wealth increasing at a clip that largely overshadows fuel costs, industry watchers see few drivers willing to idle new cars for overcrowded public transit.

"There is little possibility of people avoiding use of petrol- or diesel-driven private transport due to the lack of adequate alternative options in public transport," said Amitendu Palit, an economist at the National University of Singapore.  Continued...

Britain's Prime Minister Gordon Brown speaks, as finance minister Alistair Darling listens at the G20 Finance Ministers meeting in St. Andrews, Scotland. REUTERS/POOL New
UK joins G20 push for world levy on banks

Britain threw its weight behind proposals to impose a global levy on banks to fund future bailouts and called on the G20 to work toward a $100 billion deal to meet the cost of climate change.  Full Article | Full Coverage 

Photo

special coverage

Photo
Central Banks Cautious

Reuters tracks the policies of the world's top central banks as the debate over global economic recovery rages on.  Full Coverage 

Market Update

  • IndiaIndia
  • USUS
  • UKUK
  • Asia
  • Most Actives

column

Nipun Mehta
Nipun Mehta, SG Private Banking
India - planning the road to recovery

There needs to be an acceptable balance created between education & healthcare and infrastructure spend.  Full Article 

SHOWCASE

Robot Asimo

Snapshots of Honda Motor's humanoid robot Asimo  Slideshow 

 
Marketing Strategy
Marketing Strategy

Companies are now using direct marketing methods to sell their products.  Full Article 

 
Out of Woods?
Out of the Woods?

Analysis - CIT's bankruptcy exit fraught with uncertainty  Full Article 

 
Exit Plans
Exit Plans

Factbox - Stimulus exit plans for Asia-Pacific's big 5 economies  Full Article