Ukraine crisis could push inflation to 2.5%
The National Development Council (NDC) says a sharp rise in oil prices driven by the war between Russia and Ukraine could push annual inflation up to 2.5% at the very worst.
At a legislative hearing, NDC chief Kung Ming-hsin said the calculation was based on a "worst-case scenario" in which oil prices rise 30% by the end of the year.
Kung says such a scenario would cause a 0.6 percentage point increase in the consumer price index, lifting annual inflation to around 2.5%.
The official says it now appears "very possible" that inflation will exceed 2%, though the worst-case scenario of a 2.5 percent rise is "quite mild" by international standards.
In related news, the Ministry of Economic Affairs said in a report Monday that the price of liquefied petroleum gas (LPG) sold in cylinders for domestic use will not increase before the end of April.
In the report submitted to the Legislature, the MOEA said the prices of various commodities in Taiwan have soared recently, due to inflation and higher crude oil and gas prices in the global supply chain, amid the Russia-Ukraine war.
The ministry says in an effort to ease the financial burden on households, however, the Taiwan government will not permit any increase in the price of domestic bottled gas, at least for the next six weeks.
According to the MOEA's Bureau of Energy, the average retail price of a 20-kilogram cylinder of LPG was NT$654 as of February.
The ministry says Russia accounts for 9.7% of the total supply of LNG to Taiwan.
In related news, Taiwan’s state-run petroleum corporation CPC says its accumulated losses will likely reach NT$500 billion if global oil prices reach US$150 a barrel.
The statement comes as international crude oil prices have been rising following Russia's invasion of Ukraine.
The state refiner has hiked gasoline and diesel prices at the pump by NT$0.3 per litre for this week and that means 95 unleaded has hit a seven-year high.
CPC adjusts fuel prices weekly based on a weighted oil price formula composed of 70% Dubai crude and 30% Brent crude and under the formula gasoline prices should have increased this week by NT$5.3 per litre, while diesel prices should have risen by NT$6.9 per litre.
Government policy requires CPC to offer the lowest fuel prices of neighbouring Asian countries and means the company is now absorbing more of the price hike.
However, oil prices tumbled overnight, with a barrel of US crude falling towards US$100 after touching US$130 last week.