(From Korea JoongAng Daily)
As international oil prices fell below $40 per barrel, concerns are rising in several industrial sectors, including construction, petrochemicals and shipbuilding, which are already having a tough time due to weak export markets.
The Korea National Oil Corporation (KNOC) said on Tuesday that Dubai crude oil was traded at $38.85 per barrel on Monday, the lowest price since December 2008. West Texas Intermediate (WTI) crude was traded at $37.65 per barrel on the New York Mercantile Exchange, a drop of 5.8 percent, or $2.32, from last week. In June last year, WTI was traded at $107 per barrel.
“Just as Goldman Sachs predicted last month, we believe the price could fall to nearly $20 per barrel, which we think will be rock bottom,” Ko Sang-mo, a researcher at KNOC, told the Korea JoongAng Daily. “OPEC members and non-OPEC nations are not willing to lower their crude oil output. The competition between the two sides will eventually make them to sell oil at lower prices.”
The Organization of the Petroleum Exporting Countries (OPEC) failed to reach an agreement Friday on reducing the production of crude oil. The world needs an average of 94 million barrels of crude oil per day, but 95.7 million barrels are being supplied, according to the KNOC.
In another economic era, the 1980s, low international oil prices would have been a blessing for the Korean economy, but times have changed. The recent price collapse is caused by slumping global demand, never a good thing for an export-reliant economy like Korea.
In addition, Korea has industries that thrive on higher oil prices, including construction, shipbuilding and petrochemicals. The first two do a lot of their business with oil-producing nations including in the Middle East, Russia and other emerging markets.
Meanwhile, Korea’s petrochemicals are made from crude, and their prices fall with it. Read more