Oil prices surged to an all-time high of $67.10 a barrel on 12 August, and while they have since pulled back to about $64, analysts said prices remain volatile because of strong demand and tight supplies.
The impact of rising prices varies across the region, with stronger economies such as Japan, South Korea and Singapore expected to cope better than the poorer countries of Southeast and South Asia.
Philippine President Gloria Arroyo has ordered drastic steps to conserve energy, including reducing the number of vehicles in her own car convoy.
Manila last year paid $4.57 billion for its oil imports.
"If we do not conserve, we will reach a point where the oil bill of the country is going to threaten the foreign exchange reserves," said Philippines Energy Secretary Raphael Lotilla.
Economic Planning Secretary Augusto Santos said gross domestic product (GDP) this year would grow by 5.1% instead of 5.3% if oil remained between $60 and $70, while inflation would range from 5.7% to 8.1%.
Gloria Arroyo has ordered drastic
steps to conserve energy
For Thailand, soaring oil prices would slash corporate profits as consumers tighten their belts, Macquarie Securities' head of research Andrew Stotz said.
Other analysts said the economy would suffer from higher inflation, slower GDP growth and a wider current account and trade imbalance.
Even in Malaysia, a net oil exporter, analysts say the Kuala Lumpur Composite Index would fall below the psychological 900-point level if prices reached $70 a barrel.
Inflation to peak
A leading Malaysian think tank last month cut its GDP growth forecast for 2005 to 5.1% from 5.4%.
Singapore, Southeast Asia's most advanced economy, does not expect high oil prices to slow the economy.
Japan spent $55 billion on oil
imports last year
South Asian economies would reel from $70 oil.
Analysts in Pakistan warned inflation would top the government estimates of 8% this year.
"The hardest hit would be fixed income groups, the middle class and the poor," said economist Shahid Hasan Siddiqui, who leads the Research Institute of Islamic Banking and Finance.
Bangladesh, whose oil bill totalled $1.5 billion in the financial year ending 30 June, said skyrocketing prices have strained the country's balance of payments position.
Inflation is approaching 10%.
Sri Lanka's annual average inflation jumped to 12.7% this month, up from 4.3% a year ago, mainly because of higher oil prices, the central bank said.
Vajira Premawardhana, executive director at LOLC Securities, said the government may try to keep retail prices artificially low because of impending elections.
"Who's going to pay for the free lunch? Something has to give in, either exchange rate or inflation"
Harsha de Silva,
But economist Harsha de Silva said it would be difficult.
"Who's going to pay for the free lunch? Something has to give in, either exchange rate or inflation," de Silva said.
Northeast better off
Northeast Asia's buoyant economies are likely to cope better.
Analysts in South Korea said the impact of $70 oil on the stock market and broader economy would be limited.
"The impact from high oil prices on the economy is smaller than the past as both the global and the domestic economy are getting used to expensive crude oil," said Shin Min-Yong of LG Economic Research Institute.
Analysts say the effect on
northeast Asia will be limited
"But high oil prices could spark uncertainties in the stock and bond markets and could affect the real economy."
Analysts said Japan's stock market would look at how high oil prices affect the United States.
"If higher oil prices act as a drag on the US economy and people tighten their consumption, the Japanese stock markets will likely be impacted," said Ryuta Otsuka, strategist at Tokyo Securities.
Japan spent $55 billion on oil imports last year.
Analysts in China said the impact of high oil prices on the stock market would be mixed.
"Enterprise will pass their extra costs on to the consumers. But energy-consuming items such as cars make up a relatively small part of the typical consumer basket, so the impact on private consumer spending will be limited," said Niu Li of the State Information Centre, a government think tank.
For Taiwan, $70 oil prices would hurt economic growth and fuel inflation, said Norman Yin, professor of National Chengchi University.
"If the upward trend of oil prices continued, the (impact) on the economy would be particularly felt from the third quarter," Yin said.