Korea: Top official says frugality is best way to deal with soaring oil prices

Finance and Economy Minister Jin Nyum said yesterday that the government will consider measures such as the adoption of a "fifth-day-no-driving system" to deal with stubbornly high oil prices.

Jin and other economic ministers will convene today in a meeting presided by Prime Minister Lee Han-dong to establish the government's plan to cope with the prevalent oil crisis.

Nonetheless, finance ministry officials denied that the plans would include revisions of key macroeconomic projections.

Meanwhile, saying that the nation as a whole is slow to adapt to high oil prices, the finance minister emphasized that frugality on energy consumption remains the best cure.

In addition, Jin relayed a stern admonition toward the reckless shortsightedness of investors, particularly institutional investors, whom he argued should be to blame for the languishing stock market.

Despite OPEC's recent announcement to increase oil production by some 800,000 barrels daily, oil prices have refused to drop down to previous levels, Jin argued, which is why the government has upgraded the issue as the government's current top priority.

"Despite the fact that Korea imports all of its oil, Koreans lack discipline in conserving energy, particularly with excessive air conditioning usage in the summer and heating during the winter season," Jin said. "It is only natural that summer should be hot and winter should be cold."

One countermeasure that will be discussed is for the government to set the example by tightening its belt via changing its current "tenth day-no-driving policy" to a "fifth day no-driving policy" and hinted that such a system may be applied to the private sector.

However, Jin declined to provide any tangible answers to whether the government would push for such a transition given the modest success of the current system.

"Public sector workers' compliance rate in refraining their use of personal vehicles is estimated at a mere 40 percent," Jin told local reporters. "The key to such a system's success hinges heavily on top level government officials' adherence to such routines."

Jin also offered ambiguous answers in regards to the government's intent to implement flexible tariffs - a tool whereby the government can freely adjust tariffs on fluctuating goods to muffle the impact to consumers - reiterating that the issue would be resolved in today's meeting. However, Jin implied that as long as oil prices are deemed to stay at high levels in the long-term, flexible tariffs would not be executed.

Ministry officials have said repeatedly that the government expects oil prices to drop to stable levels by next spring or the second quarter.

As a rule of thumb, a $1 per barrel rise in oil prices translates to a loss of $1 billion to the trade surplus, while slowing down economic growth by 0.1 percent.

Meanwhile, Jin also admonished investors' tendency to trade in the equity markets with a short-term speculative mentality, directing most of the blame to institutional investors.

"Large institutional investors should assume some responsibility for creating periodical investor panic with their short-term trade practices," the minister said.

Updated: 09/15/2000

http://www.koreaherald.co.kr/news/2000/09/__02/20000915_0207.htm

-- Carl Jenkins (Somewherepress@aol.com), September 15, 2000