Oil Hitting Record Highs
Oil prices are hitting new highs and seem to be sitting comfortably above the $125-a-barrel watershed.
US Light Crude hit a record high of $139.12 on Friday 6th June, while Brent Crude also found an all-time peak at $138.12. Since March US Light Crude has risen by more than $35 a barrel. Oil’s consistent performance of late is largely due to the weakened dollar, which has pushed many investors towards commodities. However, oil’s spiking prices are also a result of supply problems in the US, Russia, Mexico and Nigeria, coupled with OPEC’s recent statement that it would not be raising output. The President of OPEC has even warned that US$200 a barrel is not out of the question.
Compared to April last year, Singapore's CPI has increased by 7.5 percent due to higher costs of food, transport, communication and housing, the highest in 26 years. The soaring oil prices are causing headaches for motorists, with petrol hitting a record high $2.18 a litre in Singapore. The results of high fuel prices have had a significant impact on operating costs. Fuel prices in Malaysia have increased 41 percent and 63 percent for diesel which is pushing up the price of food imports. According to the Agri-Food and Veterinary Authority, Singapore gets 46 percent of its vegetables from Malaysia. Therefore, higher fuel prices translate to higher import costs - one of the catalysts driving up inflation. It is proving to be a difficult issue for all major central banks around the world as they try and balance slower growth with inflation pressures. The easing demand from the developed world for crude has been more than made up for from the emerging economies such as China and India.
The global airline industry has been hit hardest; the International Air Transport Association says it expects to see a US$6 billion loss for 2008. Some budget carriers have begun to introduce new measures to pass on additional cost such as charges for check-in baggage and adding to the hefty fuel surcharge consumers currently pay.
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