While the midterm elections in the United States in November are the best example of the influence of fuel prices on the political sphere, the upcoming votes in Asia could also be affected. Voting is already underway in Indian state elections and South Korea is holding a presidential poll in early March. There are also Australian general elections and a contest for the upper house in Japan in the coming months.
Oil’s relentless march to triple digits has already prompted political action from incumbents. India cut retail sales taxes on petrol and diesel in November and there has been an unofficial price freeze since. South Korea imposed a temporary 20% cut in fuel taxes from October to April, which could be extended, while Japan subsidizes refiners to make fuel.
According to Sonal Varma, chief economist for India and Asia ex-Japan at Nomura Holdings Inc., governments in economies where wage levels lag behind inflation are the most vulnerable to an induced policy reaction. by gasoline.
“If a country has low-income growth and high inflation, then that becomes a double whammy, and then that could have both economic and political repercussions,” she said. This is of particular concern in Asia, given that all major economies in the region are net importers of oil, Varma said.
Australian retail gasoline is up 80% since early May 2020, while in Japan it has risen 37% as oil recovers from the depths of the pandemic. In India, major state-owned fuel retailers are expected to raise prices sharply after elections ending next month.
Voters there head to the polls in elections that run until early March in five states, including Uttar Pradesh, the largest state with more than 200 million people. Inflation, which breached the central bank’s 6% tolerance limit in January, signals a tough challenge for Prime Minister Narendra Modi’s Bharatiya Janata Party. Rural wages have not kept pace, rising just 3.31% in December from a year earlier, according to data from Bloomberg Economics.
South Korea elects a new president on March 9. Incumbent President Moon Jae-In is barred from seeking re-election, and polls indicate a tight race between his party and opposition candidates. Average wages rose 4% last year, while year-on-year inflation was 3.6% in January, so price gains may not play as big a role in the vote as elsewhere.
BloombergAustralian Prime Minister Scott Morrison is due to call a general election before the end of May and polls show he could face a crushing loss. Consumer confidence has taken a hit as households battle soaring petrol prices, with the Reserve Bank of Australia forecasting core inflation to top 3%. Average salary levels increased by 2.2% in the third quarter of 2021 compared to the previous year, according to data from the statistics office.
In Japan, more than half of the seats in the upper house are up for grabs in a vote in July, which could affect Prime Minister Fumio Kishida’s chances of staying in office. Inflation expectations among households are at their highest since 2008, while average monthly cash incomes fell slightly in December from a year earlier. Kishida said on Thursday that other policies aimed at mitigating the effect of high oil prices on households were being discussed.
The growing political focus on trying to lower oil prices represents a move away from commitments made at the COP26 meeting late last year to accelerate efforts to phase out fossil fuel consumption. Rising oil prices are swelling the coffers – and influence – of Saudi Arabia and Russia, and reinvigorating an industry that was moving toward cleaner energy sources.
“High fuel prices have been a persistent issue in the global inflationary environment since 2021,” said Vandana Hari, founder of Vanda Insights, an oil market analysis provider in Singapore. “Of all categories of consumer goods, fuel prices are a particularly politically sensitive issue.”
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