Oil Prices Set New Record Highs

After the second oil shock, Middle Eastern Dubai oil, which constitutes approximately 70 percent of Korea’s oil imports, surpassed the $40 barrier for the first time.

West Texas Intermediate also surpassed the $47 barrier, worsening the oil crisis and greatly affecting the Korea economy.

According to the Korean National Oil Corporation, Middle Eastern Dubai Oil on August 19 rose by $0.63, closing at $40.28.

With the exception of the $42.25 record price of Dubai oil set on November 11, 1980 amidst a worldwide oil crisis, recent prices were recorded as the second highest Dubai oil price in history.

The spot price of WTI traded on the spot rose $0.53, closing at $47.34 and breaking the $47 barrier. Brent oil also rose by $0.13, closing at $47.34 and breaking the previously set record high.

Futures prices also rose accordingly.

WTI with September maturity traded at the New York Mercantile Exchange (NYMEX) raised by $0.52, closing at $47.27.

The $47 barrier was broken for the first time since the oil exchange markets commenced in New York.

The National Oil Corporation explained that the price spikes worsened after the U.S. Energy Information Administration announced a 1.3 million-barrel reduction of its oil inventory. Also, the flow of oil from Iraq has shown no improvement and has also acted as a catalyst, furthering the rise in prices.

On the other hand the Ministry of Commerce, Industry, and Energy (MCIE) called for an emergency conference to discuss solutions for the current oil shock.

The MCIE has held on to its policy of not creating short-term solutions to this problem such as an immediate reduction of traffic taxes. Long-term solutions such as the promotion of energy conservation are currently being reviewed.

Chi-Young Shin Kwon-Heui Hong higgledy@donga.com konihong@donga.com