Russia-Ukraine War – Surging Oil Prices Impact Inflation across Asia

17 March 2022

Crude oil’s relentless surge due to Russia’s invasion of Ukraine threatens to stoke inflation across Asia. The rising inflation rates are forcing central banks to decide whether to create a tighter policy against higher prices or hold off amid the blow of economic growth. As a net importer of energy goods, Asia is vulnerable to the surge in oil prices triggered by the ongoing Russia-Ukraine war.

Here are some facts and stats related to how the crude oil surge is impacting Asia’s biggest economies:

China – world’s largest crude oil importer

China, the world’s largest crude oil importer, is facing a squeeze on companies’ profits and consumer spending power, as well as slower demand, complicating Beijing’s effort to stabilize a slowing economy. China imported crude oil worth US$176,321 million in 2020. Here’s a year-wise analysis of China oil imports from the world.

China is the top destination of Russian oil exports accounting for 31.7% of the total value of shipments in 2021. If we yearly trends of China’s imports of Russian oil, we found that the value of oil shipments from Russia has increased in the last ten years. Below given chart shows the dollar amount of China oil imports from Russia from 2012 to 2021.

Japan – Inflation could rise

The rising crude oil prices have also increased inflation in Japan as well. According to industry experts, the inflation rate in Japan could hit 2% briefly, and rise further toward summer, but it’s unlikely to stay at 2% stably. Japan imported crude oil worth US$62,807 million in 2021. Saudi Arabia and the United Arab Emirates are the biggest oil suppliers to Japan, together contributing over 75% to total Japan oil imports. Here is a list of Japan’s top 5 oil import partners with their share in values reported in 2021.

South Korea – Costs of energy products will increase

South Korea is also worried about the costs of energy products in the international market due to Russia’s invasion of Ukraine. The South Korean manufacturing industries rely heavily on imports for energy and the country only just returned to a surplus in trade in February 2022 after a two-month caused by high oil prices. Here are major energy goods which South Korea imported in 2021.

Other than Asia, Australia is expected to have little impact of rising crude oil prices on its economy. The country is a major exporter of liquefied natural gas, shipments of which hit a record high in 2021 driven by a surge in energy demand and prices. According to the economists, Australia could see a boost to export revenue, national income, and economy. For a complete review, we have to see in which direction the Russia-Ukraine war goes and how the world would take up the rising prices of crude oil and other commodities.