EU proposes to stop importing crude oil from Russia

As the European Union (EU) released a plan to ban crude oil imports from Russia, global oil prices spiked by more than five percent. Concerns are rising that surging oil prices may last long enough to offset the positive effects of oil tax cuts by 30 percent in South Korea.

Crude oil West Texas Intermediate (WTI) for June was traded at 107.81 U.S. dollars per barrel on Wednesday (local time), up by 5.27 percent from the previous transaction day in the New York Mercantile Exchange (NYMEX). Dropping to 98.54 dollars per barrel on April 25, June NYMEX WTI showed an upward trend. Brent crude oil July futures rose by 4.93 percent to 110.14 dollars in the London-based Intercontinental Exchange (ICE).

The main contributor to the rise of five percent in global oil prices is the EU’s announcement to ban Russian crude oil over six months in a phased manner and prohibit the import of refined products from Russia late this year. This plan, once it gains final confirmation, will become the second sanction against Russia in the energy industry following the last month’s ban on Russian coal imports.

Increases in global oil prices may lead to higher gasoline and diesel prices in the domestic market. Although the South Korean government imposed a sharper oil tax cut from 20 to 30 percent starting from this month, rising global oil prices may reduce the effects of oil tax cuts. As of 2 p.m. on Thursday, the average of gasoline prices in gas stations across the nation was 1,932.35 won per liter, down by 2.12 won from the previous day, which is still left unaffected by the increasing global oil prices.


Teuk-Gyo Koo kootg@donga.com