Global oil prices are expected to remain high for the foreseeable future, fueled by geopolitical risks caused by Iran‘s suspected nuclear program, local think tanks said Wednesday.
Leading private think tanks such as Samsung Economic Research Institute and Hyundai Research Institute said the steady rise in crude prices in recent months stems from mounting uncertainties that can be triggered by a showdown in the Middle East.
“The current situation comes from plentiful liquidity in the market and the urge to prepare for possible developments such as Iran blockading the Strait of Hormuz that could serious affect worldwide crude supply,” a SERI report said.
Since Tehran, which is accused of maintaining a clandestine nuclear weapons program, can take steps to block the strategic sea lane at any time, this fear can sustain high oil prices, it predicted.
HRI also supported this view, stressing that despite efforts to diffuse tensions, the Iranian situation remains worrisome.
With demand for crude likely to go up steadily in the future among developing economies like China, there is little likelihood of prices going down, it said, adding that there is a move by speculators to buy commodities, including crude oil, which will further push up prices.
Reflecting this, the finance ministry, state-run Korea National Oil Corp. and the Korea Center for International Finance all expressed concerns that international crude prices could hurt the country’s economy and trigger inflationary pressure.
KNOC data showed that prices for the West Texas Intermediate, Brent and Dubai -- the three major benchmark market crudes -- have all spiked from late 2011.
Brent and Dubai crudes traded at $123.80 and $121.09 per barrel as of Monday up 15 percent each from the last day of 2012. WTI rose 8 percent to $106.72 in the same time period, the data showed.
The national oil company said spot prices for the Dubai crude, which makes up the bulk of South Korea‘s imports, have risen sharply in the past few months. This can adversely affect the government’s effort to control inflation.
Seoul is aiming to keep consumer prices growth down to 3.2 percent for the whole of 2012, from a 4 percent on-year gain tallied in 2011.
“The spike in crude prices is further exacerbating uncertainties caused by eurozone woes and a general slowdown in the global economy,” the finance ministry said in a report released on Tuesday.
It said policymakers will keep close tabs on the fallout of crude prices on inflation and be ready to implement immediate remedial action plans. Inflation can hurt production, consumption and business investment, affecting economic growth.
The ministry in charge of South Korea‘s overall economic policy said that countries around the world may try to diffuse the Iranian issue at the Seoul Nuclear Summit scheduled to start on March 26.
“If progress is made in the two-day summit, there may be a shift in current global crude oil price trends that can ease economic concerns,” a ministry official said.
(Yonhap News)
