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Asian Petroleum Review : Jan-March 2011
34 HIGH AND RISING Oil prices have risen steadily this quarter. Bench- mark U.S. crude hit a 26-month high on Monday near $92 per barrel and is forecast by some analysts to be headed to $100, driven by quantitative easing in the United States and as robust growth in China and In- dia drive demand. A weak dollar and OPEC's evident reluctance to in- crease output add to the case for costlier oil in 2011. "We see broad price rises in soft commodities, hard commodities and black commodities (oil and coal), which have translated into imported inflation and imported cost increases," said Chen Xingdong, chief China economist at BNP Paribas. Demand for oil products in China, the world's No.2 consumer, rose 13.9 percent annually in Novem- ber, as millions more Chinese bought cars and indus- trial and petrochemical demand boomed, despite a two-year old fuel pricing system designed to ensure rising crude oil costs were passed on to consumers. BEYOND ENERGY In India, New Delhi this week deferred a decision on whether to lift the state-set price of diesel and cooking fuels, which would add to inflation, annoy the embattled ruling Congress party's rural base and fur- ther embolden the political opposition. Headline inflation in India was 7.48 percent in Novem- ber, and the central bank's 5.5 percent inflation target for the end of the fiscal year in March appears increas- ingly out of reach as food and fuel price rises accelerate. The rise in global crude prices comes on top of high food prices and surging growth in many Asian econo- mies. Chen estimated that while fuels contributed 10 percent to China's 5.1 percent November inflation, a 28-month high, food accounted for 74 percent. Food prices, which like energy tend to be beyond the scope of monetary policy, jumped 11.7 percent in China in the year to November, while India's food price index rose 14.44 percent on the year as of Dec. 18. "Rising oil prices will not be the only problem for infla- tion. Higher food prices and wages, which are seen across Asia, will also push up inflation from the demand side, " said Nuchjarin Panarode, economist at Capital No- mura in Bangkok. (Additional reporting by Yoo Choonsik, Abhijit Neogy, Kevin Yao, Leika Kihara, Tom Miles, Rie Ishiguro, Orathai Sriring and Aditya Suharmoko) (Editing by Tomasz Janowski) Thomson Reuters Asia Petroleum Review Vendors sell vegetables at a market in India, where annual food inflation accelerated for the fifth straight week in late December to the highest in more than a year REUTERS/Ajay Verma