Asia and US seriously concerned over oil spike

India joined the US, Japan, China and South Korea to voice "serious concern" today about a record spike in oil prices but vowed to keep scaling back politically sensitive fuel subsidies.

Oil prices, which have soared five-fold since 2003, posted their highest ever one-day gain of $10.75 to close at a new record of $138.54 in New York after hawkish remarks by an Israeli official on oil producer Iran.

Senior officials from the United States, and Asia's four largest powers said in a joint statement after talks in Aomori, Japan that they "share serious concerns" about the current level of oil prices.

"These prices are unprecedented and against the interest of both consuming and producing countries. They pose a great burden — particularly on resource-scarce developing countries," it said.

US Energy Secretary Samuel Bodman warned oil producers that it would do them no good if the US economy took a hit.

"It's not good for producing nations to see US struggling economically (as) they depend on us to be a significant engine in world economic activity," Bodman told reporters.

Despite political sensitivity, the joint statement called for a scaling down of fuel subsidies, saying it would "enhance energy efficiency" and lead to investment in alternative energy.

Developing economies tend to heavily subsidise fuel costs in a bid to ease the burden on the poorest members of society.

India and Indonesia have recently been forced to hike prices amid soaring global crude oil costs, triggering large anti-government demonstrations in the two countries.

Share prices of Oil companies after price hike

	MIXED FORTUNES SHARE PRICE May 30, ‘08 Jun 6, ‘08 %chg BPCL 357.70 299.64 -16.23 HPCL 244.65 212.90 -12.98 Indian Oil Corporations 425.35 378.00 -11.13 Reliance Industries 2401.65 2239.35 -6.76 GAIL 400.25 384.35 -3.97 ONGC 864.30 938.50 8.58

The lower-than-expected subsidy burden on upstream companies led to a spurt in ONGC and GAIL during the week, while the share prices of oil marketing companies (OMCs), including Indian Oil Corporation, Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL), saw a slide as investors factored in the under-realisation that these companies will continue to have despite the fuel price hike.

The shares of OMCs are down because despite the increase in fuel prices, these companies will still be making losses and the price hike will not boost their earnings significantly. Even after the hike in retail prices of auto-fuel and LPG, the OMCs will be short by about Rs 20,000 crore this year compared to Rs 16,000 crore in FY08," said a Delhi-based analyst.