Curbing energy consumptionThe government has announced a string of measures to cope with the renewed surge in oil prices. This is significant in two ways.
First, the government’s action reignites public awareness to the need for energy-efficiency and comes just as global oil prices, which had plummeted to $30 per barrel, have bounced back to over $60 per barrel. The Korean economy, driven primarily by fuel-based factory production, will see a current account deficit if the price goes over $90. The government was right to take preemptive action against a further hike in oil prices.
Second, the government’s latest measures signify a change in energy policy, with its priorities having shifted from supply to demand. Until now, energy policy has been designed to reign in fuel prices through a stable supply system.
The government refrained from raising electricity and gas fees regardless of increases in global oil prices and kept industrial energy rates at below market prices to help stabilize consumer prices as well as help these industries retain their competitive edge.
But this kind of government relief has spoiled the Korean economy, transforming our industries into voracious consumers of energy.
When producing the same value-added output, Korea consumes 1.3 times to 1.6 times more energy than Japan, Germany and the United States because of its liberal use of energy and natural gas.
Electricity fees are 60 percent to 70 percent of what they are in Japan while household natural gas prices are just one-third of Japan’s. No rallying cries for energy conservation at home and industrial sites will be of use under this kind of price structure.
We agree that the government needs to raise electricity and gas prices to a certain level and support the idea of linking them to global oil and fuel prices. The government must redress its energy policy to create a more energy-efficient economy.
One concern about the plan is its effect on inflation and households in the current economic environment.
If the government tries to reflect global price hikes in public energy fees, the shock to the economy will be too great. It needs to be careful and increase prices gradually. At the same time, it must keep a watchful eye on operations at state energy monopolies Korea Electric Power Corp. and Korea Gas Corp.
They need to be encouraged to continue with their restructuring plans so that management abuses cannot take place in the aftermath of higher fuel charges.