\n<\/p>\n
Mr Song noted that the impact of price increases will not be felt immediately across all sectors.<\/p>\n
For example, the price of vegetables may take time to increase, while airfares would rise faster due to the heavy use of fuel.<\/p>\n
Mr Song added that the situation in the Middle East not only impacts oil supply, but also other commodities, such as chemical products and metals.<\/p>\n
This could mean higher fertiliser costs, which could translate into grocery prices. Similarly, disruptions to the supply of aluminium, for example, could raise construction costs, he said.<\/p>\n
Beyond inflation, rising oil prices could have broader effects on the economy, including on business and consumer confidence, Mr Song said.<\/p>\n
\u201cThe longer oil prices stay high or continue to climb, (consumers) will cut back on consumption because they are worried about just the impact of high energy costs, curbing consumption, which may lead to businesses cutting back,\u201d he said.<\/p>\n
Ms Ling agreed that, indirectly, the negative knee-jerk reaction on financial assets could contribute to some near-term caution on discretionary spending.<\/p>\n
Consumers could also cut back on travel plans that may have involved flying through the Middle East airline hubs, she added.<\/p>\n
The extent of economic impact would depend on the evolving situation in the Middle East, he added.<\/p>\n
If oil prices stay higher for longer than six months, there will be a \u201csignificant impact\u201d on growth and inflation forecasting, he said.<\/p>\n
But it is still early days, he said. \u201cIt is only the first week, and a lot of things have already happened,\u201d he said.<\/p>\n
\u201cWhat we’re seeing in terms of energy costs reflects that uncertainty over demand and supply conditions, not just today, but also in the coming days and weeks.\u201d<\/p>\n
One economist noted that while energy prices may cause a short-term bump in inflation, they are unlikely to derail the broader disinflation trend.<\/p>\n
Ms Sheana Yue, a senior economist at economic advisory firm Oxford Economics, said businesses may not pass on all the higher costs immediately. Instead, the price increases are likely to be gradual, as some firms may absorb part of the extra expense.<\/p>\n
Singapore has buffering measures and regulatory tools to smooth out energy price shocks, she added.<\/p>\n
For example, quarterly tariffs in the electricity market help to average out periods of volatile energy prices, while the Monetary Authority of Singapore\u2019s exchange rate mechanism helps reduce the impact of rising import prices.<\/p>\n
\u201cIn short, we expect the impact to be manageable and largely temporary for most households,\u201d she said. \u00a0<\/p>\n
Analysts also noted that, as one of Asia\u2019s largest refining and oil trading hubs, the macroeconomic impact of the war could be cushioned if profit margins at refineries remain strong.<\/p>\n
\u201cHistorically, this has meant that higher Brent oil prices are associated with better terms of trade for Singapore, suggesting it is not a pure loss for the economy,\u201d said Ms Yue.<\/p>\n
Ms Ling agreed that Singapore\u2019s role as a refining, storage and trading ecosystem means it could see stronger demand for fuel processing, blending and storage services.<\/p>\n
\u201cThat said, this may not fully offset the broader economic drag if oil prices remain elevated for an extended period of time and start to weigh on global trade and growth,\u201d she said.<\/p>\n<\/div>\n