Bangkok--22 Nov--Centre for Asia Pacific Aviation Oil prices have surged to close to USD100 per barrel in overnight trade, while the fallout of the US subprime mortgage crisis and worries over the outlook for the US economy rattles investors. There is widespread belief that more bad news about debt is still to come. The Dow Jones index fell nearly 200 points yesterday, before closing for the Thanksgiving weekend. The Conference Board reported a sharp decline in the US economic leading index in Oct-07, led by large declines in housing permits, initial claims for unemployment insurance, and the index of consumer expectations. The behaviour of the economic indexes suggests that “risks for economic weakness persist”, according to The Conference Board, but economic growth “should continue in the near term, albeit at a slower pace”. The US Federal Reserve predicts sluggish GDP growth for next year, forecasting the economy to expand between 1.8% and 2.5%, down from its previous projection of 2.5% to 2.75%. Investors are now increasingly expecting an interest rate cut by the US Federal Reserve in Dec-07, which is leading to further US dollar weakness. For US airlines, the double-whammy of surging fuel costs and weaker GDP growth is stimulating more talk of mergers. In Asia, the impact has not been as great, as economic growth remains strong and US dollar weakness has cushioned the blow of rising fuel costs. Cathay Pacific CEO, Tony Tyler, stated that Asia's airlines still have pricing power in the current market, adding “that's how we can keep our heads up, despite the very high fuel costs”. That signals fuel surcharges will continue to rise, particularly in less competitive long-haul international markets. "Much depends on the Chinese economy, Asia’s dominant market," said Peter Harbison, Executive Chairman of the Centre for Asia Pacific Aviation. "If it were to stumble, the blowtorch could be quickly applied to Asia’s economies and its airlines."