Asia's fast-rising emerging economies such as China and India may have been singled out as pillars that will shore up global energy use in the face of record oil prices, but fissures caused by demand destruction are forming elsewhere in the region.

Even as industry projections are for continued albeit slower economic growth, many of Asia's energy import-dependent states are straining under the weight of rising costs which in theory could feed through and trim oil use.

Looking ahead, a major economic slowdown isn't yet on the radar. Even so, the slide in share values is a deepening worry, and the impact of the oil price surge in the past few months is still in the pipeline and won't feed through until the end of the year or beyond.

Even so, minor nip-and-tuck adjustments by the private sector have snowballed, illustrating how demand erosion is starting to make itself felt.

"Outside of the OECD, there's growth in consumption but high oil prices are leading to lower demand," David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney, said Thursday.

"Demand-side adjustments may take some time but I don't think we've seen all of the demand impact yet."

In Asia, with oil prices trading consistently above $100 a barrel since April, one area where high prices are eating into oil demand is in the aviation sector.

Airlines across Asia are scrambling to cut flights and increase surcharges in a bid to staunch hemorrhaging cash flows, and this is having an impact on jet fuel demand.

Fuel costs for airlines, which typically account for up to 40% of total operating expenses, have soared more than 60% since January.

Late in May, Qantas Airways Ltd. (QAN.AU) said it was cutting capacity across its domestic and foreign networks by around 5%, and Korean Air Co. (003490.SE) said it would cut flights on 12 international routes and suspend five others.

Taiwan carrier China Airlines Ltd. (2610.TW) followed with cuts to long-haul flight schedules to Los Angeles, San Francisco, Seattle and Vancouver, as well as to Sydney.

Several Indian airlines say they too expect to reduce services and cut some routes due to high fuel costs.

High jet fuel prices are being felt in other ways: in June, Hong Kong's Cathay Pacific Airways Ltd. (0293.HK) ordered pilots to fly slower to burn less fuel - its flights now take an average of four minutes longer, enough to save several million U.S. dollars in the second half of 2008.

Earlier this month, the Geneva-based International Air Traffic Association said air cargo - a pillar of the global aviation industry - also slowed substantially, with Asian volumes contracting in May by 0.5%.

On Monday came news that cargo volume growth at Hong Kong's airport slowed sharply in June. The growth in the number of passengers using Hong Kong airport - a major Asian aviation hub - also slowed from May.

And demand for refined oil is being eroded in other ways. Thousands of Japanese fishing boats have been sitting idle at port for weeks because fishermen cannot afford fuel.

Squid fishermen went on a two-day strike in June and Japan's tuna industry may keep one-third of its long-line fishing boats in port this summer due to high fuel costs.

Of course, this amounts only to a bucket in the ocean of Asia's diesel demand.

On Tuesday, about 200,000 Japanese fishing boats - almost the country's entire fishing fleet - stayed in port in protest over high fuel prices.

Unsure About The Giants

Much uncertainty also looms over the outlook for China and India, where oil demand has stayed strong partly on the back of state fuel subsidies.

About a dozen countries in Asia still keep retail fuels, mainly kerosene used as a cooking fuel, but also gasoline and diesel, under some form of state control, despite governments cutting back on this in recent months.

China - which Thursday posted second-quarter GDP growth of 10.1% on-year, slightly below analysts' expectations for a 10.3% increase - has hiked gasoline and diesel price nine times since 2004, most recently in June, a move that encouraged state-owned oil refiners to crank out more products.

But even if global prices continue to climb and Asian governments move further to bring domestic prices in line with global ones, some analysts argue it won't have a big impact on demand.

Pent-up, unfulfilled demand in China - evidenced by lines in service stations in many parts off the country, and China's rapidly growing auto and aviation fleet, suggest that a significant slowing in Chinese oil demand won't happen anytime soon.

And given that China's oil demand growth is forecast to account for 48% or regional growth, that's an important factor.

"Beyond pent-up demand it can be little harder to predict," Moore said, suggesting demand may cool over time if prices continued to rise.

South Korea, a big crude oil importer and exporter of refined products actually imported extra crude recently.

The latest available data, for May, show monthly crude imports of 76 million barrels, 8.5 million barrels more than in April.

And projections based on planned South Korean refinery run rates show that volumes of crude oil due to be imported in July and August will rise from May levels after a slight dip in June.

In India, oil product use has been driven primarily by income growth, according to the International Energy Agency.

In May, India used 11.7 million tons of refined products, up from 11.24 million tons in April. Number crunchers will need to wait until early August, when oil use data for June are due, to see what impact India's June 5 rise in domestic oil prices has had on demand.

"It's difficult to say if demand will be down in the short term because of price increase. If prices remain high for a long time it's possible as people begin to change their consumption habits. Even oil companies are not sure," said Basudev Mohanty, head of the Petroleum Planning and Analysis Cell, the oil ministry's statistical organization.

"It looks like consumption data for June will show slightly less growth than previous months."

On Tuesday, OPEC offered a downbeat assessment for world oil demand into next year, citing faltering economic growth and increased fuel conservation, albeit with the demand slowdown not really biting until next year.

The 13-member group, which pumps about 40% of the world's crude, cut its 2008 demand forecast by 100,000 barrels a day and, in its first outlook for 2009, said consumption next year will be 10% weaker.

Still, some industry pundits aren't convinced that prices have climbed to a point that's enough to turn the demand ship around.

"If (global) demand is still growing, no matter how slowly, oil prices probably aren't high enough," said a U.S. oil analyst.

The IEA, in its monthly report July 10, forecast oil demand to grow to 86.85 million barrels a day in 2008 - or just 1.04% higher on-year.

(Simon Hall in Beijing and Gurdeep Singh in New Delhi contributed)

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