South Korea Economy 'Shaken' by Oil Price Shock... Concerns Grow Over Chain Reaction of Inflation

[Anchor]

As international oil prices surge well past 100 dollars per barrel, the shock is rippling through the domestic economy. The stock market has taken a heavy hit, and with fuel prices and airfares on the rise, concerns over escalating inflation are growing deeper.

Here is a report by reporter Kwon Ran.

[Reporter]

The KOSPI has given up the 7,000 mark once again in just three trading sessions, sliding back into the 6,900 range.

This comes as the expanding conflict in the Middle East has pushed international oil prices and interest rates up simultaneously, intensifying anxieties over inflationary pressures and an economic slowdown.

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

It stated that over 90 percent of the crude oil and naphtha import volume for next month has already 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 a dual bottleneck crisis materializes—with the Red Sea, an alternative route to the Strait of Hormuz, also threatened—the country can no longer rest easy.

[Jang Tae-hwan / Associate Research Fellow at the Korea Energy Economics Institute: We can distribute shipments through Suez. However, because shipments have to take a detour around South Africa's Cape of Good Hope, transit times become much longer than the usual month or so, and freight charges must be paid for the extended time...]

Airfares are already beginning to stir.

The international fuel surcharge, divided into a total of 33 tiers, peaked at its highest level last May before declining, but jumped by 7 tiers entering this month.

For Korean Air, the fuel surcharge alone exceeds 700,000 won for a round-trip route between Korea and New York.

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

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

The currently applied 9th maximum price system runs until the 18th of this month, 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 system.

However, raising the maximum price to reflect the surge in oil prices could stimulate domestic fuel prices and inflation, while maintaining the current level would inevitably increase the fiscal burden to compensate for refiners' losses, leaving authorities in a difficult predicament.

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