As world oil hits $100 a barrel, Koreans start to feel the pain

“I can no longer afford the fuel,even though my car runs on [cheaper] diesel, instead of gasoline,”

With world oil prices finally hitting a record $100 per barrel during Wednesday’s trading, the shudders are being felt throughout import-reliant Korea.
Although the Korean government is claiming that the hikes are still at an “affordable” level, sky-high prices are showing signs of weighing on the national economy, as consumers brace for a worsening situation.
International oil prices have advanced between 45 percent and 48 percent since late 2006, said Lim Jong-ryong, head of the economic policy bureau at the Finance Ministry. “But local gasoline prices have not soared as much. Even though consumer prices come under the direct influence of oil prices, other economic indices have not been affected,” he said. “You don’t necessarily have to be fettered by the symbolic implications of the $100 per-barrel mark.”
Jang Gun-sang, another high-ranking official from the Finance Ministry, said the Korean economy is advanced enough to manage the current oil price range, as income levels are high and the country’s industrial infrastructure is mature.
Samsung Economic Research Institute echoed the position, saying in a recent report that Dubai oil, the benchmark for international prices, would have to reach $151, in current dollars, to meet the level last seen during the oil shock of 1980.
Consumer prices and the country’s trade balance, however, are already feeling the impact of the rapid rise in oil prices. Last month, consumer prices rose by an annualized 3.6 percent, surpassing the target levels set by the Bank of Korea of between 2.5 percent and 3.5 percent. The country also saw a trade deficit in December for the first time in 57 months.
President-elect Lee Myung-bak promised during the presidential campaign to slash oil taxes by 10 percent in an effort to ease the pain of voters struggling with high fuel costs. In fact, snowballing oil prices have prompted many to opt for public transportation rather than private vehicles, analysts say.
While the number of cars that passed through the toll gates of Namsan tunnels 1 and 3 in central Seoul totaled 200,000 in October last year, that figure dropped to 199,000 in November and 172,000 in December.
Kim Hyung-geun, 29, an office worker who commutes from Ilsan, Gyeonggi to Yeouido in central Seoul, said he now leaves his diesel-powered sport utility vehicle at home and commutes by public transit. “I can no longer afford the fuel, even though my car runs on [cheaper] diesel, instead of gasoline,” he said.

By Seo Ji-eun JoongAng Ilbo/ Kwon Ho Staff Reporter [spring@joongang.co.kr]