By Seo Jee-yeon and Kim Yon-se
Staff Reporters

The nation’s import prices soared by 8.2 percent in April from a year ago as oil prices surged to a 13-year high.


The Bank of Korea (BOK) reported the April data is the highest increase rate in 35 months since the 9.4 percent rate was reported in May 2001.
The import prices posted the sixth consecutive year-on-year growth _ 6.4 percent in November, 6.5 percent in December, 7.4 percent in January, 3.7 percent in February and 3.3 percent in March.

The nation’s export prices climbed 3 percent in April from a year ago, but the prices inched down 0.2 percent from March because of the won’s weaker position against the dollar, the BOK added.

The sharp jump in import prices, including raw materials and oil, is imposing a heavy burden on small- and medium-sized enterprises.

Amid the Korean won’s depreciation against the dollar, import prices will likely be in a steady rising trend, the BOK reported.

``Continuous increases in import prices will not only stoke up inflation, but also aggravate the profitability of small companies,’’ a BOK official said.

Prices of raw materials surged by 10.3 percent in April from a year ago, while prices of consumer goods increased 1.9 percent. In particular, basic raw materials, such as crops and minerals, jumped 20.4 percent during the period.

Concerns over an energy crisis and its fallout on the South Korean economy are intensifying as the world oil prices continue its upward trend.

International oil prices went beyond $40 a barrel on Wednesday, marking a 13-year record high.

West Texas Intermediate (WTI) future prices, the U.S. benchmark crude oil prices, reached $40.77 a barrel, its highest level since October 1990.

In London, Brent crude oil future prices went up to $37.95 a barrel, but remains well below its lifetime peak of higher than $40, struck in October 1990.

The Dubai crude oil spot prices went up to $34.93 a barrel on the same day as Korea, the world’s fourth largest oil importer, depends on more than 70 percent oil imports from Dubai.

With the level of Dubai oil prices near the warning level of $35, the government is considering launching measures, including oil import tax cuts, to ease fears of an energy crisis.

According to the Korea Energy Economics Institute (KEEI), when the annual average price of Dubai reaches $35 a barrel, Korea’s gross domestic product (GDP) this year is likely to fall 1.43 percentage point and consumer prices rise 1.53 percentage points.

The Korea International Trade Association (KITA) also predicted that South Korea will be hit hardest in Asia due to soaring prices. The KITA projected a $5 rise in the world oil prices would shave off $5.5 bilion from the country’s trade balance in a year.

As part of efforts to minimize the fallout of the oil price hike, the government is considering lowering the traffic tax and taxes on oil imports to hold the gasoline price below 1,360 won. The government and the ruling Uri Party on Thursday agreed to decide the scope and the timing of tax cuts within this week after monitoring prices.

Industry watchers predicted the effect of the tax cut could cut the gasoline price by 30 to 60 won per liter.

The government and the ruling party also agreed to offer tax break to facilities investment, using energy efficient materials, by 7 percent, while strengthening construction rules to raise energy saving as a long- term measure to cope with future energy crises.

Despite the government measures, worries over the energy crisis and the economic slowdown are expected to be prolonged as the world oil prices are forecast to continue the upward trend for a while.

U.S. analysts even project that oil prices may surge to $50 a barrel, badly hitting the world economy because it seems to take some time to resolve issues to boosting oil prices.

The price increases, similar to gulf war highs, are partly a result of increasing fears of supply disruption in the middle east following attacks in recent weeks. Saudi Arabia holds most of the worlds spare oil capacity, they said.

The fall in U.S. fuel stockpiles has also contributed to hit the global oil market as U.S. petrol usage accounts for about 12 percent of global demand.

Thirdly, the price hike came from the skepticism over the global oil output and refinery capacity of oil exporters amid growing global demand.

KEEI officials warned if international oil prices continue to hover at the $40 range, it might be difficult to see 5 percent economic growth this year.

kys@koreatimes.co.kr

jyseo@koreatimes.co.kr