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Gov`t inaction worsens oil crisis

Posted September. 14, 2000 15:18,   


The livelihood of our nation is being jeopardized by rising crude oil prices. The continued rise in prices could paralyze the economy.

The greatest problem is the government's inability to manage the crisis. Such a crisis as the energy squeeze must be met by the government taking the lead. However, our government has gone into action only after a full-blown crisis has hit the nation, an after-the-fact haphazard countermeasure.

At the beginning of the year, as international crude oil prices breached US$30 per barrel, the IBRD (World Bank) warned of the possibility of a third oil shock. Many similar warnings by civilian research institutes backed up the IBRD. However, the government turned a deaf ear. At the time, the related officials of the Ministry of Finance and Economy showed passing interest in the so called "baseless crisis warning," and stated, "In time, the price hike will be brought down on its own initiative."

At the beginning of this month, as prices began to make a suspicious rise and as domestic stocks began to fall as a result, the government continually stated, "Let us wait and observe the OPEC meeting on September 10."

The international crude oil prices reached US$34 a barrel in early March, marking the first time in the nine years since the 1991 Persian Gulf War that the price per barrel exceeded US$30. Within a single year, the price increased three-fold. Even so, the government has been optimistic in March, saying, "The United States, as it faces the presidential election, will not simply look on, and as such, international crude oil prices will decrease."

However, when a report was made a short time later that should the price continue to rise and it is reflected in the domestic market, the April general election in Korea would be negatively affected. The government flip-flopped in its stance. With oil prices taking a downward course with the approaching summer, down to US$25 a barrel, the government sat back and stated that it had been right.

When the international barrel price of crude oil stabilized at US$10 early last year, many of the government and financial experts suggested that the government increase its oil reserve. They suggested that the government divert some of the profits in dollars to purchase crude oil when the price was low. The government responded at the time, "Without much possibility of increases in oil prices, it would only cost more to store the reserve oil."

Having gone through two oil shocks, in the 1970s and 1980s, the government had pledged to diversify import routes for oil other than Middle East, to promote oil drilling abroad, and to establish energy conservation measures. However, the dependency on crude oil from the Middle East has gone from 58% in 1985 to 72% last year. The investment capital for oil drilling research abroad has decreased from US$583 million in 1997 to US$200 million last year.

Although the government collects 8-9 trillion won in taxes on crude oil, not much of the profit goes toward investment in the area of energy source development. In its effort for energy conservation, although the government has increased the tax for petroleum product for transport vehicles utilized mostly by the general public, the government has been lacking in leadership for making counter measures against energy consumption by industries, which account for 60% of total usage.

"As we import much of our energy resources, there really isn't much we can do," the government has stated.

However, the government must admit its fault for failing to implement any sound policy.

Park Won-Jae parkwj@donga.com