Asian governments from Indonesia to China to India are in no rush to eliminate domestic fuel subsidies by raising cheap local pump prices, officials said this week, even as crude oil rockets toward $100 a barrel.

Policies that have shielded consumers in Asia's most populous nations from the impact of oil's four-year rally look set to remain until year-end, if not longer, with governments enriched by roaring economic growth prepared to pay out for popularity.

And the longer they stay, the longer their motorists will be able to keep filling up their tanks without enduring higher costs that could undermine demand growth, analysts say.

"They will raise fuel prices, that's inevitable, but it'll be a question of timing and careful planning," said Faiz Hussin, senior oil markets analyst at consultants PFC Energy.

That doesn't seem likely soon, and should help support oil's rally even as U.S. demand growth begins to falter.

Of the International Energy Agency's estimated global oil demand growth of 1.23 million barrels per day (bpd) this year, two-thirds will come from India, China and the Middle East -- all of which subsidise the cost of fuel for their motorists.

The world's second-largest consumer China announced in September it would not raise any state-set prices for the rest of 2007, as it makes taming inflation its top priority, and officials show little sign of backing down on that pledge.

"In the overall course of development you have to take a coordinated approach. That is to say, choose the lesser of two evils, the best of two benefits," Zhu Zhixin, deputy chairman of the National Development and Reform Commission, told reporters on Thursday when asked about a price rise.

Beijing forces state refiners and retailers to bear the burden of selling gasoline and diesel at only about 57 U.S. cents a litre, a quarter less than in the United States. It has given top refiner Sinopec year-end subsidies to offset losses.

It last increased gasoline and diesel prices in May 2006, when U.S. crude was trading at around $70 a barrel. On Wednesday oil touched a fourth consecutive record high at $89 a barrel.

"Almost everyone in Asia that still has these kind of market distortions has said they'll hold the line on prices," said Jeff Brown, managing director of FACTS Global Energy.

India, which has cut prices twice since June of 2006, last week approved the issuance of nearly $6 billion in bonds to partly compensate state refiners for their losses.

Retail gasoline prices are up 58 percent since early 2003, while crude oil prices have nearly trebled in the same period, but Prime Minister Manmohan Singh's government looks unlikely to risk more public ire after coming under pressure from its communist allies over a U.S. nuclear deal.

"It looks unlikely that there will be a fuel price hike," said Harish Menon, an economist at ING Vysya Bank in Mumbai.

"The reasons are more political than fundamental."


Gulf oil producers such as Saudi Arabia and Kuwait -- whose coffers are flushed with petrodollar revenues -- are not the only ones willing to use those funds to keep their fuel cheap.

Malaysia, the biggest net exporter in Asia, will not raise prices before year-end, a local newspaper quoted the trade minister as saying on Thursday, although consumers will have to bear higher costs as its reserves begin to dwindle.

Indonesia, already locked in battle with falling oil and gas production, has pledged to hold off another price increase until after elections in 2009, having successfully manoeuvred to more than double costs two years ago without provoking public uproar.

Asia Pacific's lone OPEC member, Indonesia is also the region's biggest importer of motor fuels, and a fiscal crisis in mid-2005 caused by rising import costs prompted the price hike.

So far this year markets are showing no sign of a similar meltdown and the economy is set to grow above 6 percent in 2008, the fastest clip in 11 years.

"The government has no plan to raise domestic (subsidised) fuel prices," Mines and Energy Minister Purnomo Yusgiantoro told Reuters this week. "Yes, the (oil) subsidy will rise, but our income from oil will also rise."

Vietnam, which removed most state controls on fuel prices this spring, has halted the steady rise in retail gasoline recently, sources inside the country say. Despite producing crude, Vietnam imports all its fuel as it lacks refineries.

"We can't raise prices despite a seemingly liberalised market as the government wants to maintain the levels given high inflation," an official at a Vietnamese oil importing firm said.

Thailand, a rare case in Asia of a government successfully halting runaway demand growth by eliminating subsidies nearly overnight, said on Thursday it would not return to its old ways, betting that crude prices would eventually retreat.

"A rise is possible but it is going to be short term," Energy Minister Piyasvasti Amranand told radio. (Additional reporting by Felicia Loo in Singapore, C.J. Kurrien in Mumbai and Ploy Chitsomboon in Bangkok)