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| A traditional market in Daegu is crowded with shoppers this week, with just days remaining before the Lunar New Year long weekend, which runs from Jan. 31 to Feb. 2. Yonhap |
Global price hike in oil, raw materials, shipping add to consumers' woe
By Yi Whan-woo
A woman in her 70s, surnamed Park, is increasingly switching to lower-cost brands when she goes grocery shopping, because she finds it tough to cope with surging food prices while her family's income remains unchanged.
"This is the least I should do, because you can't stop buying everyday essentials just because their prices are rising fast," she said.
Park's case illustrates inflation-pinched shoppers, whose earnings are stagnant or falling amid a steep increase in the prices of oil, raw materials and shipping worldwide.
The three collectively add to worsening global inflation brought forth by the COVID-19 pandemic, which according to Nobel-Prize winning economist Paul Krugman is at its highest "in almost 40 years."
Global oil prices rose more than 55 percent over the past year, with the primary benchmarks hitting a seven-year high, Jan. 18.
Brent crude rose almost 1 percent to hit $87.22 per barrel, and West Texas Intermediate crude increased by 1.3 percent to $84.89 per barrel.
Citing its sources, U.S. business news channel CNBC reported the oil price can climb up to $100 per barrel this year.
The global situation is feared to offset the government's temporary cut in fuel taxes by 20 percent from November to April. The policy was embraced in an effort to ease the impact of surging oil prices on the country's consumer inflation and everyday life.
Regarding raw materials, the price of nickel, used in automotive and aerospace plants, shot to its highest in 11 years at the London Metal Exchange (LME), Jan 19.
Cobalt, a key material for electronics and secondary batteries, nearly doubled in price.
Also used in secondary batteries, lithium carbonate saw a five-fold price increase from a year earlier.
For shipping, the Shanghai Containerized Freight Index (SCFI), a global bellwether for maritime freight costs, surpassed the 5,000-point mark on Jan. 7 for the first time in its history.
The index sagged below the 1,000 level for most of the past decade, before breaking the 3,000 mark in May 2021 and then 4,000 in July of the same year.
Under the circumstances, the producer price index (PPI) marked the highest increase in 10 years in 2021. It stood at 109.6, up 6.4 percent from the previous year.
Released by the Bank of Korea (BOK), the index measures prices for goods and services among suppliers here and is a major barometer of consumer inflation.
The central bank explained that the rise is attributed to price hikes for crude oil and raw materials which have driven up manufacturing costs, and that means there isn't much that can be done internally to control it.
Joo Won, a senior economic researcher at Hyundai Research Institute, pointed out in a report that working-class households already suffered the highest economic misery index seen in the last 10 years in 2021.
The index, which combines unemployment and inflation, is estimated to have recorded 6.0 last year, a steep surge from 4.5 of 2020 or 4.2 marked in 2019. He said it isn't likely to be much better this year.
He advised that the government should take measures to curb inflation which is a major obstacle to the livelihood of the working class.
"It should take preemptive measures including cutting tariffs or easing import quotas on items that are seeing price surges. There also should be efforts to enhance transparency in sales and distribution channels through digitalization."
