How to cope with an energy crisis?

The dizzy rise in international oil prices from sanctions on Russia following its attack on Ukraine is stirring concerns for a global energy crisis. The Brent crude price broke above $130 a barrel to hit as high as $139. The West Texas Intermediate crude also hovered above $130. The prices are the highest in 14 years since 2008 shortly before the outbreak of a Wall Street-triggered global financial crisis.

The United States is discussing with its European allies a ban on Russian oil, fueling the price spike. Blockage of Russian oil that accounts for 7 percent of global supply also could disrupt the global energy market. Global investment banks project that crude oil prices could soar to $150 or $200. Some even warn of a global oil shock in the likes of the 1970s.

Oil price surges directly effect inflation. Korean consumer price gains have been accelerating even before the Ukraine crisis. The consumer price index rose 3.7 percent against a year-ago period in February, running above 3 percent for the fifth straight month. Petroleum prices shot up 19.4 percent from the previous year, pushing up prices across the board.

A lengthened Ukraine crisis would push petroleum prices higher and send inflation above 4 percent. Gasoline prices across gas stations nationwide averaged 1,800 won ($1.50) per liter. The exchange rate of the Korean currency finished Monday at 1,227 won per the U.S. dollar, its lowest in 21 months. Weakening in the Korean won makes the expensive fuel imports more expensive to aggravate the burden on Korean consumers.

High inflation, high interest rates and a strong U.S. dollar have become a challenge to households and companies. Yet the government and political system remain carefree. Aggressive fiscal expansion and widening fiscal deficit add to inflationary pressure. Utility fees and public transportation fares capped until the presidential election also will bounce up. The new administration is certainly expected to spend more, given all candidates’ hefty campaign promises.

The government says it is prepared to respond to such problems in order to stabilize prices. But extending a fuel tax cut by three more months has been the only viable action from the Moon Jae-in administration. Priority should have been placed on the utilization of nuclear energy to phase out fossil fuels, but the government has wasted time by stubbornly adhering to its original plan to abandon nuclear reactors. It must stop reckless spending and tend to energy supply to stabilize prices before it is too late.