Over the past six months, declining oil prices have sent shockwaves through the global economy, providing much-needed relief to consumers and factories in some countries while slashing export revenues and undermining currencies and government budgets in others. But the longer oil prices hover near six-year lows, the more they will affect the prices of natural gas and other commodities and manufactured goods, particularly those from Southeast Asia.
Overall, falling oil prices and East Asia's broader economic and geopolitical evolutions will have mixed effects on the region. If they remain low, the prices of oil, natural gas and commodities could deter foreign investment into more expensive offshore and enhanced oil recovery projects in countries like Indonesia and Malaysia. At the same time, cheap energy will provide a boost to consumers and manufacturers that could improve trade throughout the region. Low energy costs could even help governments accelerate political and regulatory reforms designed to improve transparency and continuity for foreign investors — a critical precursor to successful regional economic integration.
