SINGAPORE: With oil prices continuing to push into uncharted territory, economists have been re-looking their growth forecasts for the year.

Some said that GDP growth may be squeezed by as much as half a percentage point, with the transportation sector among the hardest hit by high fuel costs.

US crude futures have new records at above US$128 a barrel supported by fears of supply disruptions in Nigeria and Iran as well as robust demand from China.

Oil prices are now double compared to a year ago, but economists are largely staying positive.

Robert Prior-Wandesforde, Senior Asian Economist, HSBC, said: "Well it's very easy to get very gloomy at the moment. You've got this combination of the US and European problems to a certain extent, and you've got the high food and oil prices as well.

"However, we think that the Singapore economy and Asia region in general will actually surprise on the upside for Singapore. We are looking for 6 per cent this year, so (it's) in the top-end of the government's range."

The economy may meet its growth targets for this year, but one sector that is expected to feel the heat is transportation.

Rising fuel prices are eating at the margins. SMRT and ComfortDelgro have registered a drop in earnings for the March quarter and SIA has warned of slower demand amid persistent high fuel prices.

Industry watchers said they expect transport companies to see a decline of about five to 10 per cent in full year net profit from rising oil prices.

Victor Shum, Senior Principal, Purvin & Gertz, said: "The transportation sector will likely be hardest hit, and Singapore Airlines with the consumption of jet fuel will feel the pinch.

"And to a larger extent, businesses can't fully pass on the cost of higher fuel prices, so businesses will be hard affected."

Industry watchers said that as investors continue to pour money into the oil markets, prices will tick higher, hitting the US$130 mark by the end of this week. - CNA/vm