Skyrocketing Oil Prices

Steadily increasing international oil prices has reached $40 per barrel, the highest in 14 years.

This number is up more than 50 percent than that of 2002, and there are warnings that we may face a full-scale era of high-oil prices combined with a third oil shock.

As of Thursday, according to Korea National Oil Corporation, spot prices for WTI ended at $39.59, up $0.66 compared to the previous day, and its future prices at $39.57, up $0.59 on Wednesday.

Both spot and future prices for WTI are the highest since mid-October in 1990 just before the first Gulf War, which was $41.02 on October 11 and $39.69 on October 12 in 1990.

In addition, Brent Oil from North Sea and Dubai Oil from the Middle East have surged up closer to a record number.

Not only growing concerns over the political uncertainty in the Middle East from a series of terror attacks in Saudi Arabia, Syria, and Turkey but also America’s lower than expected petroleum reserves seemed to have led to the soaring oil prices.

However, experts point out that the current situation is a signal for the collapse of low oil prices period beginning in the mid-1980s while a new area has emerged with the strengthening of strategic alliance in OPEC surrounding the cut in oil production, the change in interests surrounding the Middle East since the September 11th event, and China’s fast growing economy.

International Energy Agency (IEA) warned in its latest report on “The Impact of New Oil Shock” that high gas prices caused by OPEC’s supply control policy had been the main culprit for global economic recession in 2000 and 2001 and there were no guarantees that there would be no further oil shocks.

Under such circumstances, U.S. Vice President Dick Cheney, the chairman of NEPDG(the National Energy Policy Development Group) in the U.S., proposed that energy security should be a top priority on the government’s policy in both trade and foreign affairs. Both Chinese and Japanese state heads have been making great efforts to secure oil resources as well.

Yet, many people pointed out that South Korea, with its chronic adherence to low oil prices and no functioning organization for energy security negotiations, must set up their countermeasures immediately.

“The absence of energy security policy can lead us to catastrophic circumstances in both national economy and security,” a fellow at Royal Institute of International Affairs in Britain, Baek Geun-wook stressed.