Korean Economy Rattled by Oil Shock… Growing Fears of Cascading Inflationary Pressures

[Anchor]

As international crude oil prices well exceed $100 a barrel, shocks are rippling through the domestic economy. The stock market has been severely rattled, and fuel prices and airfares are rising, further heightening concerns over inflation.

Here is a report by reporter Kwon Ran.

[Reporter]

The KOSPI surrendered the 7,000 threshold once again in just three trading sessions, sliding back into the 6,900 range.

This is the result of international oil prices and interest rates rising in tandem as the Middle East conflict shows signs of escalation, which has also magnified pressures on inflation and fears of an economic slowdown.

Although international oil prices are soaring, the government's assessment is that there are no major problems with short-term supply and demand for now.

It states that more than 90 percent of the crude oil and naphtha import volumes for next month have been secured compared to last year.

Some oil refineries are also known to have secured the volumes they need through the end of this year.

However, if the dual bottleneck crisis becomes a reality—where even the Red Sea, which served as an alternative route to the Strait of Hormuz, comes under threat—we can no longer rest easy.

[Jang Tae-hwan / Associate Research Fellow, Korea Energy Economics Institute: Volumes can be distributed via Suez. However, since the cargo has to travel around the Cape of Good Hope in South Africa, the transit time becomes much longer than the usual month or so, and freight charges must be paid for that extended time as well....]

Airfares are already starting to budge.

The international fuel surcharge, which is divided into a total of 33 tiers, peaked at the highest tier last May and had been falling before jumping by 7 tiers entering this month.

Based on Korean Air, the fuel surcharge alone exceeds 700,000 won for a round-trip route between the U.S. and New York.

If the recently surging international oil prices are reflected, the October fuel surcharge to be announced next week is likely to rise further.

While domestic gas station fuel prices are maintaining stability thanks to the maximum petroleum price system, finding an exit strategy for the price ceiling system has become difficult for the time being.

The 9th maximum price system currently in effect runs until the 18th, but an official from the Ministry of Trade, Industry and Energy hinted at the possibility of an extension, stating that it is not the time to discuss ending the price ceiling system.

However, raising the price ceiling to reflect the rise in oil prices could stimulate domestic fuel prices and inflation, while maintaining the current level would inevitably increase the fiscal burden to compensate for the losses of refineries, leaving authorities in a difficult dilemma.

(Camera: Choi Dae-woong | Video Editing: Kim Jin-won | Design: Seo Seung-hyun, Park Cheon-woong)
※ Please note: This article was translated by AI and may contain errors.