Korea’s business community declared an “energy emergency” Thursday, pledging to implement energy conservation measures to help the country cope with high-flying oil prices.
The resource-poor country relies almost entirely on imports for its oil needs, with 82 percent being imported from the Middle East.
In a meeting with Knowledge Economy Minister Choi Joong-kyung in Seoul, business leaders from the country’s major economic organizations said they will start asking executives and employees to keep their cars home at least once a week, which is in accordance with recommendations made by the government.
On hand at the meeting were representatives from the Federation of Korean Industries, the Korea Chamber of Commerce and Industry, the Korea Federation of Small and Medium Business and the Korea Employers Federation and other industry-wide umbrella groups.
By enforcing this measure, experts said that crude oil imports can be cut by 7,000 barrels per day that can add up to 750 billion won ($667.6 million) in a one-year period.
The public sector has already started to tell employees to drive less after it upgraded the country’s energy alert level from “blue” to “yellow” on Sunday after the benchmark Dubai crude stayed above the $100 per barrel for more than five straight days.
Seoul has started to turn off exterior scenery lighting on bridges and monuments and ordered similar measures for large apartment complexes and retail outlets throughout the country.
“Companies are starting to realize that they must do their part to cope with the latest situation with the price of crude hovering at around $110 per barrel,” a government official said. He added that if the turmoil in some North African countries spreads to other neighboring nations, prices of crude oil could rise to around $130 per barrel in the future.
The ministry said that for companies that ask their employees to drive less, the government will provide carbon reduction credits and make available the 600 billion won in state funds that have been set aside to assist in diagnosing energy-related waste in the workplace.
In addition to giving incentives to companies, the government will give cash rewards up to a maximum 5 million won for households that are successful in cutting back on energy use. Up to 10,000 households will receive rewards, it said.
A surge in international oil prices could be a concern for the Korean economy, but its impact on Asia’s fourth-largest economy will not be bigger than predicted, local think tanks said Thursday.
“The unrest in the Middle East could have negative impacts on the Korean economy, but data shows that the economic recovery in the U.S. is faster than expected at the same time,” the Samsung Economic Research Institute said.
The research institute said any negative impact on the Korean economy, stemming from surging oil prices, could be offset in part by improving economic conditions in America.
The LG Economic Research Institute also predicted that Korea’s economic growth may get a boost if the Libyan crisis is resolved at an earlier date.
“Currently, oil prices and the U.S. economic recovery are the two swing factors for Korea’s economic growth,” said the research institute. “Its economic growth may accelerate if problems in Libya are resolved.”
Hyundai Research Institute, another local think tank, also forecast that oil supplies to Korea will run smoothly if democracy takes root in the Middle Eastern countries.
Consumer prices in Korea jumped 4.5 percent last month from a year earlier, marking the steepest hike in 27 months. The higher-than-expected price growth is attributed to the rising oil and food prices.
The Korean government is seeking to contain consumer inflation at around 3 percent this year while targeting 5 percent economic growth. The country’s central bank put its 2011 inflation projection at 3.5 percent.
Some experts are raising concerns the nation might not be able to attain its earlier economic growth projection of 5 percent this year, but the finance ministry said it has “no plans to adjust the previous projections at this moment.”