Soaring gasoline bad timing for Asian governments facing voters

Bloomberg

Soaring gasoline prices are fanning inflation and causing a headache for governments and central banks worldwide. In countries with elections coming up, they’re an extra headwind for the incumbents.
While the US mid-terms in November are the prime example of fuel prices feeding into the political sphere, upcoming votes in Asia may also be affected. Voting is already underway in Indian state elections and South Korea holds a presidential poll in early March. There’s also an Australian general election and a contest for the upper house in Japan in the next few months.
Oil’s relentless march towards triple figures has already prompted political action from incumbents. India cut retail taxes on gasoline and diesel in November and there’s been an unofficial freeze on prices since. South Korea enforced a temporary 20% drop in fuel levies in October through April, which may be extended, while Japan is subsidising refiners to make motor fuel.
Governments in economies where wage levels are lagging behind inflation are most vulnerable to a gasoline-induced political backlash, according to Sonal Varma, chief economist
for India and Asia ex-Japan at Nomura Holdings Inc.
“If a country has low-income growth and high inflation, then it becomes a double-whammy, and then it could have both economic and political repercussions,” she said. It’s a concern in Asia, given that all of the major economies in the region are net oil importers, Varma said.
Australian retail gasoline have risen by 80% since early May 2020, while in Japan they’re up 37%, as oil recovered from the depths of the pandemic. In India, there are expectations the big state-owned fuel retailers will hike prices sharply following the elections that end next month.
Voters there are going to the polls in elections that run through early March in five states, most notably Uttar Pradesh, the largest state with more than 200 million people.