(2) Direct impact: This will fall
(3)
(4)
on
directly
the consumer on account of the oil-based fuels consumed by households.
Indirect impact: A variety of commodities in the household consumption basket are produced locally using oil-based fuels as one of their inputs, but the energy-intensity of their production processes differs widely. For example, the running of buses depends heavily on diesel oil, whereas in the case of a shop selling clothing or books virtually no oil-based fuels are needed. Here only the most prominent items are quantified by reference to their production cost structures; the rest are pooled into an "others" category and a combined
figure is assigned judgementally.
Longer-run impact: The increase in crude oil price is expected to result in higher inflation in many of the major supplier countries for Hong Kong's imports. Assuming that prices in these countries will increase by an average of about 0.5 of a percentage point, the prices of consumer goods in Hong Kong are likely to be higher due to imported inflation.
However, since not all of the commodities consumed in Hong Kong are imported (services,
in particular, are predominantly produced locally), and since foreign suppliers may absorb part of the price increase, the resulting increase in local consumer prices will probably be smaller. In the absence of any means to quantify, this element of imported inflation is assumed to be around 0.3 of a percentage point on the CPT(A).