Recently, oil prices have been showing a sideways trend due to various factors. This phenomenon has a great impact on economic, political, and geopolitical aspects. As the war between Israel and Palestine Hamas and signs of it escalating into a Middle East war have been seen, there have been many predictions that 'production will be affected', but oil prices are gradually repeating ups and downs.
Why is it going down and up now?
US crude oil inventories fall: The US has seen a larger-than-expected drop in crude oil inventories, but is responding by increasing production through shale gas extraction and other means.
Slowing European Economy: Weak economic data from Europe has reduced energy demand. Slower economic growth, particularly in Germany, the Eurozone, and the UK, has had a negative impact on oil prices.
Instability in the Middle East: Oil prices have risen as clashes between Israel and Hamas escalate, but there are hopes that US mediation will stabilize the situation, but the possibility of an escalation remains uncertain.
Impact of rising oil prices:
World Economy:
Rising oil prices can lead to higher production costs and higher consumer prices, which can increase inflation rates12. In particular, oil prices are expected to reach nearly $100/barrel in 2023, driven by cuts in oil production from Russia and Saudi Arabia.
South Korea Economy:
Rising oil prices can lead to higher inflation and higher production costs, which in turn pushes up the producer price index2. Higher oil prices drive up consumer prices, which increases the likelihood of stagflation, which could lead to both rising inflation and weaker economic growth.2
Impact of falling oil prices:
World Economy:
Falling oil prices can reduce the cost of raw materials in international markets, which can lead to lower production costs and lower consumer prices.
South Korea Economy:
The drop in oil prices will lead to the first decline in South Korea's exports in 2023, driven by weaker IT demand, lower oil prices and a delayed global economic recovery.
High energy costs and interest rates are weighing on global demand, which in turn affects the global demand that South Korea relies on.
Falling oil prices reduce import costs, which reduces operating costs for businesses and helps lower prices for consumers.
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