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SINGAPORE: For the first time, world oil prices briefly crossed the psychologically important level of US$100 a barrel on Wednesday.
Analysts attribute the surge to tight supplies and continued strong demand.
One analyst said consumers are being hit by a double whammy, with the high oil prices and the recent spike in food prices.
Song Seng Wun, CEO and Regional Economist, CIMB-GK Research, said: "I suppose if it had been any other time, say six months ago, it probably would not have meant that much because crude oil prices had been going up steadily for the last five years.
"It only became a lot more significant now, coupled with the inflation in food prices. We have seen food prices go up significantly in the second half of last year and food prices, unfortunately, will stay high.
"CPI (consumer price index) may go up 2 percent or even beyond 5 percent year-on-year. Young Singaporeans may not have seen that kind of inflation in a long, long time."
"Even a small amount of inflation – such as what we are seeing today – can have a big impact on what you can do with your money.
"For example, S$100 today is reduced to just S$88 spending power by 2010 if we experience an inflation rate of 4 percent. And if that inflation rate is moved from 4 percent to 8 percent, that S$88 is reduced to just S$77 in 2010," said Gary Harvey, CEO of Ipac Wealth Management Asia.
The solution, however, is basic – see what you are spending on and budget carefully to stretch that dollar further.
While rising fuel and food prices will continue to have an upward impact on one's day-to-day costs, economists said there is a slight silver lining in that prices for consumer goods such as flat-screen TVs and mobile phones have remained unchanged or have even gone down.
This is because big manufacturers have managed to keep the prices down. But economists said that may not necessarily be the case in 12 months' time, if material or wage costs continue to climb.
- CNA/so
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