The Korean economy is ‘deformed’ due to the destruction of fuel demand and the decline in oil prices, which increases inflation

The Korean economy is ‘deformed’ due to the destruction of fuel demand and the decline in oil prices, which increases inflation

As international fuel demand was destroyed, the deformed structure of the Korean economy began to appear, with oil prices falling and the inflation rate rising.
The 'September consumer prices' announced by Statistics Korea on the 5th was a consumer price index of 112.99 (2020 = 100), up 3.7% compared to the same period last year, turning from a decline in price growth of 3.4% in August to an upward trend.
The reason why the price increase decreased and then increased again is because the price increase rate increased only in Korea as it decreased due to the decline in oil prices.
Korea's inflation rate of 3%, which had been dependent on the steady decline in petroleum prices, was directly hit by the 'increasing decline rate' in petroleum prices, which went from -25.9% in July and -11.0% in August to -4.9% in September. Pressure has become a new factor.
The core price index (excluding agricultural products and petroleum products), which shows the price trend, rose 3.8% in September.
According to the Organization for Economic Co-operation and Development (OECD) core price index method, the index excluding food and energy rose 3.3%.
If petroleum prices rise again, the rise in prices in Korea will act as a pressure to completely push the upward trend, exposing the international oil market as a controlling factor in Korea's interest rates and financial markets.
Regarding the abnormal fluctuations in the international oil market, Reuters reported that oil prices fell sharply on the 4th due to the 'destruction of fuel demand', in which 'demand plummeted due to a surge in international prices', coupled with the grim macroeconomic situation.
In the international market on the 4th, Brent crude oil futures fell by $5.11 (5.6%) to $85.81 per barrel, and U.S. West Texas Intermediate (WTI) crude oil dropped by $5.01 (5.6%) to $84.22.
Reuters said both benchmarks were down more than $5 from session lows, heating oil and gasoline futures were also down more than 5% and the price of crude oil was down about $10 since last week's settlement.
The U.S. Energy Information Administration (EIA) announced on the 4th that ‘finished gasoline supply’, a proxy for international oil demand, fell to about 80,000 barrels last week, hitting the lowest level since early this year.
Gasoline inventories increased by 60,000 barrels, which was larger than the predicted increase of 50,000 barrels.
JP Morgan analysts said on the 4th, “US gasoline consumption, which should increase in the fall, is at the lowest level in 22 years,” and “As fuel prices soared in the third quarter of this year, demand decreased, resulting in a one-day seasonal plunge.”
In Korea, prices for agricultural, livestock and fishery products rose 3.7% in September, expanding the increase from the previous month (2.7%).
The 7.2% increase in agricultural products is the highest increase in 11 months since October last year (7.3%).
Among agricultural products, fresh fruits such as apples (54.8%), peaches (40.4%), and tangerines (40.2%) soared 24.4%, the largest increase since October 2020 (25.6%), ginger (116.3%), and carrots (37.2%). ) Rice (14.5%) is at a high level.

JP Morgan said in an investor report, “(Oil) demand destruction has begun. “As oil prices rise, demand suppression is becoming visible again in the U.S., Europe, and some emerging countries,” he said. “(China) chose to use domestic inventory (instead of imports) in August and September of this year due to a surge in oil prices.” “There are signs that consumers have decreased their consumption after gasoline prices reached the highest level of the year in August,” he said on the 4th.
The head of JP Morgan's global raw materials strategy team said, “Demand has fallen due to the surge in oil prices in the third quarter. Oil prices hit our target of $90 per barrel in August, and we maintain our year-end target at $86.”

Deputy Prime Minister Chu Kyung-ho told reporters on the 5th that the price increase rate, which had been stabilizing downwards, soared to the 3% range for the past two consecutive months, saying, “The strong international oil price had a big impact,” adding, “In October and November, the (consumer price increase rate) Lee) I think it will stabilize in the low 3% range and stabilize towards the end of the year,” he said.