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Korea to curb impact from commodity prices
Writer : Sender
Mar 18, 2010
Finance Minister Yoon Jeung-hyun said yesterday the Korean government will take preemptive measures to buffer the possible impact from rising global commodity prices, as the global economic recovery is likely to continue throughout the year.
"Recently international commodity prices have been on an upward trend. Not only iron ore and soft coal, but oil prices are rising," Yoon told a weekly government meeting in Gwacheon.
"As the nation is relatively more vulnerable to fluctuations of international commodity prices than other countries, we need preemptive measures," he said.
Yoon projected that most commodities are likely to gain strength with rising demand from the recovery trend going forward.
"To reduce short-term impacts, the government will support funds for raw material imports, strengthen related finance as well as put more efforts to change the nation's structural vulnerability to fluctuations of commodity prices," he said.
Yoon added that the government aims to reduce the nation's oil and gas dependency on foreign countries to below 90 percent by tapping overseas resources development and securing rare metals. Korea imports almost all of its oil needs from overseas now.
Yoon's assessment on rising global commodity prices came as economists generally predict that international oil prices will gain about 30 percent in 2010 from 2009.
Kim Hyeon-wook, a research fellow at the Korea Development Institute, said Korea's annual average oil import price is expected to reach about $80 per barrel in 2010, up from $60 in 2009, due to the global economic recovery.
The KDI's projection is the same with that of the Finance Ministry.
"Oil prices are expected to rise at a slow and gradual pace, rather than showing a sudden, fast growth this year," Kim said.
"But we have to also carefully monitor the market because speculative forces, which partly drove the 2008 oil price spike, could reappear during the course of the economic recovery," he said.
The global benchmark of crude oil Western Texas Intermediate shot up to $147.5 per barrel in July 2008, but came down to as low as $35 per barrel in December due to the global recession.
The WTI traded at 81.24 per barrel on the New York Mercantile Exchange on Tuesday, up from the 2009 average of $62 per barrel.
Hyundai Research Institute research fellow Lim Sang-soo said Korea's benchmark Dubai is expected to rise to $85 per barrel on average this year from a 2009 average of $62.
"The rise in oil prices will push up import bills, which are tied with consumer prices," Lim said.
(Source: The Korea Herald)
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