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Soaring Oil Prices Cause Worries in Asia  - 2004-09-28

Crude oil prices have topped $50 a barrel during Asian trading, prompting worries that energy costs could cool off the region's economic growth.

Worries that rebel attacks would disrupt Nigeria's oil production and that U.S. oil output would be slow to recover from recent hurricanes sent prices to new highs Tuesday.

Light sweet crude oil hit a high of $50.47 a barrel during afternoon trading in Asia. That was up 83 cents from its level at the end of trading in New York on Monday.

The continued rise in oil prices has some economists and business leaders in Asia worried that the region's growth could be hurt.

Rajeev Malik, an economist at JP Morgan, says the higher oil prices will have three major affects on Asian economies.

"Countries have to shell out more foreign exchange for a higher import bill," said Mr. Malik. "To the extent that domestic fuel prices are adjusted, inflation is pushed higher, and third is to the extent that it hits consumer spending because incomes are impacted adversely."

Analysts fear the surge in oil prices will cut into corporate earnings. Most Asian economies are heavily dependent on exports, and many are loaded with foreign debt. If oil prices remain high, that could slow the big Western economies, cutting export demand. At the same time, the smaller Asian economies will have to struggle to pay off debt, and pay for energy needs.

Most Asian stock markets were lower Tuesday, partly in response to oil prices, but there was no sign of panic selling. Thailand's SET index lost nearly 1.4 percent, and the PSE Composite in the Philippines gave up nearly one percent. In Tokyo, the Nikkei 2-2-5 index fell four-tenths of one percent.

The Asian Development Bank says Thailand and the Philippines would be among the worst hit by high oil prices, because they depend most on imported oil.

The bank says Asian economies must encourage efficient use of oil and implement tax incentives to develop renewable energy sources.