[Viewpoint] A strategy meeting that went wrongThe Blue House “division” has launched a war against inflation. But prices are not an easy target. When a gun is aimed at prices, they quickly disappear in battle. But to win the war against an enemy like inflation, it is important to have a meticulous strategy. Like in all wars, it is important to forestall enemy forces in the early stages. It means the first target must be selected very strategically.
The division made oil prices its first target in the war. The commander in chief of the division, Lee, accompanied by six regimental commanders, his advisers, held a ceremony to start the war on Jan. 13. At the ceremony, the chief commander gave the regimental commander in charge of the industrial sector a very strange order, saying that “the behavior of gas stations was strange.”
“When the international oil price was $140 per barrel, the oil price in Korea was about 2,000 won [$1.80] per liter. The international price went down to $80 now, but the domestic oil price is 1,800 won,” he said. His order sounded like an ultimatum - that his regimental commander find ways to lower the domestic price of oil.
The chief was able to mention specific figures because they were discussed at the strategy advisers’ meeting. He accepted the opinion of his subordinates that the war against inflation can be won at the early stage if they can control oil prices. When the first target was announced, the public hailed the decision since oil prices have long been blamed for hardships of the working class.
Dissatisfaction with gas stations was also dissatisfaction with the oil companies, which have the right to set prices. When international oil prices went up, they increased domestic prices immediately, but they were slow to reflect the price cut in the international market. Their behavior has long been criticized by the public.
As soon as the order from the upper chain of command came, the Fair Trade Commission took up the initiative. It ambushed six large oil companies and seized their books. It even confiscated a diary, which recorded when company officials met together to have a meal.
The commission wielded a club to beat up the oil price. Although it may seem like a strange choice of weapon in the 21st century, it was more than enough. The oil companies were disarmed, and the public wasn’t backing them either.
Right around this time, the Korea Expressway Corporation pledged its loyalty to the chief commander. It ordered gas stations along highways to lower gas prices by 20 won per liter immediately. The war appeared to be an easy victory shortly after it began.
And yet, an unexpected situation unfolded. Some said the target was wrongly picked. When the international oil price went up to $140 per barrel in July 2008, the currency was 1,012 won for a dollar. In December last year, the rate was 1,135 won for a dollar. The rate went up about 10 percent, thus the domestic oil price went up automatically.
Furthermore, the government in 2008 cut the tax on oil by 10 percent and the tariff on crude oil imports from 3 percent to 1 percent. The lowered taxes, however, went back to their original rates when the international oil price went down the next year.
Critics said the government’s weak won policy and high tax rate have caused the latest oil price hike, even though the international oil price is far lower than that of three years ago. In fact, about half of the price of domestic oil consists of taxes. Thus, it was wrong to begin a war without such basic information.
The chief commander, then, tried to avoid criticism by saying his order was misunderstood. He said his Jan. 13 comment was not to pressure oil companies to lower prices. The chief commander has lost face because his advisers made poor recommendations. The strategists simply listened to the complaints of their neighbors and began the battle without deep consideration. The head of the Fair Trade Commission, who just went ahead to uphold the order, also become embarrassed.
But the chief commander is a stubborn person and won’t likely give up. Even before the war began, he often had complaints about oil companies, alleging that they had colluded secretly to fix prices.
With such a belief, the chief commander issued an order and simply jumped into a war. He did not think about why oil prices were going up.
The commissioner has already told his boss that he will control inflation. In addition to the club, the chief commander has even stronger firepower. It will be easy for him to win some battles. But now the public is wondering what his next step will be in the war against inflation.
*The writer is an editorial writer of the JoongAng Ilbo.
By Shim Shang-bok