TNAG-2028-FCO40-2890-Hong-Kong-freezing-of-Kuwaiti-and-Iraqi-assets-1990 — Page 15

stockpiling by

consuming

uncertainties in supply

of

countries in the face of the

will tend to offset at least part

the increased production from other suppliers. More

seriously,

any incident of direct confrontation between the

Iraqi and US military forces or of attack by Iraq on Saudi

production facilities will heighten

Arabia's

oil

nervousness in

outlook for the

the market immediately. A more pessimistic

near term would hence imply the crude oil

price rising to more than US$30 per barrel, or even above

US$35 per barrel if the

full-fledged war.

confrontations

Effect on inflation and production cost.

develop

into a

ጉ

8.

On consumer

price inflation in Hong Kong, three

types of impacts can be expected from an upsurge in the

prices of oil products.

due

to

households;

These are firstly, a direct impact

ás

the higher prices of oil-based fuels consumed by

secondly, an indirect impact

the higher

prices of oil-based fuels consumed by local producers get

reflected in the prices of their finished products for

local consumers; and thirdly, a longer-run impact owing to

imported inflation, as foreign suppliers of our consumer

goods pass over the effect of the oil orina hike.

9.

Various feedback suggests that the prices of oil

products in Hong Kong are likely to rise by around 10% over

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