"There is higher oil penetration in transportation and industrial fuels in Asia than in Europe and North America. There is a switch to competing fuels, but it takes a long time to accomplish those substitutions," said John Vautrain, vice president at Purvin & Gertz in Singapore. "High oil prices will push people to use other sources, but it is in the longer term, not in the short term." So far at least, Asian economies, still bouncing back from deep recession three years ago, appear to be weathering this year's oil price spike, cushioned by fat trade surpluses and low inflation. Oil demand has recovered strongly since the economic downturn in 1997 that in one year chopped almost in half regional growth in incremental crude demand. But the Paris-based International Energy Agency (IEA) recently shaved its world demand forecast for 2000 by 200,000 barrels per day (bpd) to 75.6 million bpd, largely to reflect the impact of decade-high prices principally in China and India. These countries together with SouthKorea, however, are still expected to offer the biggest chunks of incremental oil demand growth in 2000 and 2001.

"High oil prices have slowed down (crude demand) growth in Asia," the IEA's Deborah White told Reuters. "There is always a strong reaction to oil prices in the industrial sector, but this tends to be a stronger effect in emerging economies where the industrial sector is a much more major factor in oil demand than private consumption," White said.

This year, the IEA expects the Asia-Pacific region, including Australia and New Zealand, to post a rise in incremental demand of some 590,000 bpd, down from original forecasts for an increase similar to 1999 of about 800,000 bpd. China, Hong Kong and Taiwan account for 260,000 bpd of the increase in 2000, with South Korea seen up by 130,000 bpd and India, Pakistan and Bangladesh posting gains of 95,000 bpd. White said China remained unpredictable, although she had downgraded growth there from last year's 435,000 bpd, which included Hong Kong and Taiwan.

"Last year I couldn't seem to raise China's demand forecast enough, but now it seems to have slowed," she said. India, which together with Pakistan and Bangladesh showed a rise of 190,000 bpd in 1999, was hit by drought earlier this year capping diesel demand in the agricultural sector.

The Indian government is also planning to phase out subsidies on consumer prices, which was also expected to impact demand, White said. In total, Asian-Pacific demand this year will account for 62 percent of total incremental world growth forecast at 950,000 bpd, according to IEA statistics.That is slightly down from last year's share of 67 percent of global growth of 1.2 million bpd.