A sign at a Seoul gas station shows soaring gasoline and diesel prices. As the national barometer climbed to 2,001.15 won ($1.63) and 1,920.44 won per litre, respectively, commodity prices in some parts of the capital are hovering above 2,800 won on Sunday. (Yonhap)
SEJONG — Soaring international energy prices have increasingly strained South Korea’s trade balance, which posted a deficit for the first 79 days of the year on a cumulative basis.
According to the Korean Customs Service, domestic imports of three major energy resources – crude oil, gas and coal – amounted to $38.4 billion between January 1 and March 20. This marked an increase of 85.4% over the same period. period of 2021.
A 69.8% increase was seen in crude oil imports year-on-year, 92% in gas and 150.6% in coal.
The strong growth in imports was attributed to a surge in commodity prices. Along with the rapid growth in demand during the normalization process amid the pandemic, the war between Ukraine and Russia has stoked inflation.
Russia produces about 12% of crude oil and 17% of natural gas for the world market. Its invasion of Ukraine and the subsequent economic sanctions against Russia by the global community have aggravated the price growth.
The price of Dubai crude, which was only $50-55 per barrel in January 2021, rose to $75-80 at the end of 2021. It ranged between $110 and $127 in March 2020.
Economists say soaring energy prices are expected to weaken the state’s trade balance and place a heavy burden on businesses and households.
A researcher at the Korea Development Institute was quoted by a news outlet as saying that “high import prices are driving down the current account surplus, or could be in the red”.
He said soaring commodity prices, which trickled down to producer and consumer prices, would lead to inflationary pressures.
Korea recorded a trade deficit of $5.97 billion in the first 79 days of the year, while the figure for the corresponding period of 2021 was a surplus of $6.6 billion.
The government, in its unveiling of economic policy guidelines for 2022 in December, projected that the country would post a current account surplus of $80 billion. But the surplus could be smaller than expected given the current situation.
The government had predicted that Dubai crude would trade at an average of $73 a barrel this year. But international crude prices, including Dubai, Western Texas Intermediate and Brent, hover around $110.
The country’s consumer prices have posted growth of around 3% for five consecutive months, including a growth of 3.7% in February. In particular, petroleum products had the effect of increasing consumer prices by 0.79 percentage points.
More and more market insiders expect consumer price growth to be stronger this month and next.
By Kim Yon-se ([email protected])
