[News UP] Oil prices and stock markets from the Middle East 'surge'...Domestic vegetable prices are also "concerned."

■ Host: Anchor Cho Jin-hyuk
■ Starring: Lee In-cheol, Director of Economic Research Institute,

* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information. Please specify [YTN News UP] when quoting.

[Anchor]
The unstable situation in the Middle East is causing oil prices to fluctuate, affecting the global economy. In Korea, vegetable prices soared ahead of the kimchi-making season, putting the water on alert. I will talk to the head of the Economic Research Institute for a detailed economic story, Lee In-cheol. Please come in. First, let's talk about oil prices. Oil prices are fluctuating as concerns over an all-out war between Israel and Iran grow, how much has it risen now?

[Lee In-cheol]
International oil prices have been on the rise for three consecutive days since the Middle East risk emerged. The first day rose more than 2%, the second day was strong, and the New York Stock Exchange, which closed early this morning, saw international oil prices rise more than 5%. Iran is an oil producer. It accounts for about 3% of the world's crude oil production, and it produces about 3.3 million barrels a day. However, if Iran actually attacks Iran's oil refineries, production is disrupted, but Iran ranks fourth in the world in reserves. Since 9% of the world's supplies are buried in Iran, the supply and demand of international oil could be disrupted if this becomes a reality, so West Texas Intermediate surged 5.15%, rising to $73 per barrel and $77 per barrel in the UK, but international oil prices rose 8% in three days. This weekly gain is the highest weekly gain since March last year.

[Anchor]
In the midst of growing anxiety, President Biden's words stimulated this anxiety. What did you mean?

[Lee In-cheol]
Then, would Israel, which has been attacked by more than 180 rounds now, stand still? I was worried about two things. One is whether to attack Iran's nuclear facilities. I drew a line on this. The U.S. was against it, but now it is considering retaliatory measures, including Iran's attack on oil facilities. Saying it with this nuance, it did not make it a fait accompli, but the fact that it was also considering the possibility of an attack shocked the market. Iran has not officially been able to export crude oil due to international sanctions. Nevertheless, if Iran is known to smuggle secretly, including China, and Iran was really attacked by Israel and hit by oil facilities, wouldn't it be a monkey? Then, because there is a precedent of blocking the Strait of Hormuz in the Middle East, and because it covers one-third of international crude oil shipments, international oil prices soared by more than 5% in a day.

[Anchor]
In just one week, it's about 8%, it's about 5% in a day, and there's a growing concern that if Iran, a major oil producer, is attacked, the supply of oil will decrease further. Some people say it could reach more than $100 a barrel. What do you think about this?

[Lee In-cheol]
So, when this Middle East conflict escalates, various specialized institutions talk about Plan A, Plan B, and Plan C, which are the worst cases. In the worst case, international oil prices could jump by three digits per barrel. In fact, international oil prices have fallen to their lowest level in a year and three months and to $60 per barrel even before the Middle East war.

If Iran's oil facilities are attacked, it can reach triple digits per barrel. Although the production volume is around 3 percent per day, the oil reserves themselves account for 9 percent of the world's reserves. If Iran really blocks the Strait of Hormuz, it will inevitably disrupt the supply of crude oil from the Middle East, which accounts for a third of the world's supply, because it is the oil export channel for Saudi Arabia or the United Arab Emirates. As a result, even the far-right in Israel must attack for now. We're talking about attacking Iran's oil refineries, so this is the worst-case scenario, I said earlier.Ma is about Plan A, Plan B, and Flat C, and it shouldn't become a reality.

[Anchor]
Oil prices are the most fundamental factor that affects prices, so we're talking deeply like this. However, if you go to a gas station in Korea, you don't feel that gas prices are that expensive. I don't think so. International oil prices are rising like this, but prices don't seem that expensive at gas stations in Korea, is this because there is a time difference?

[Lee In-cheol]
Words have a way of coming true. The most worrisome thing for me is that this is Iran on the 1st. It's October 1st, but I think it will reflect the gas station from this weekend. In fact, the rise in international oil prices is usually reflected with a time difference of two to three weeks, but the fall in international oil prices reflects the surge in international oil prices. Of course, we may run out of stock too soon. Nevertheless, I think domestic gasoline prices have fallen for nine consecutive weeks, falling to 1,500 won nationwide. In light of past experiences, international oil prices are likely to be preemptively reflected rather than a decline, but the government's concerns are growing. The government has now taken the 11th step in reducing oil taxes. It's scheduled to end at the end of this month. Originally, if it was around $60 per barrel, the tax revenue is too flat even if it is not, but I was going to end the oil tax cut at a time when the tax revenue has been lost for two consecutive years.

If you look at it now, international oil prices are now 70 dollars and approaching 80 dollars, and in the worst case, if Iran's oil refinery is attacked, international oil prices, which began in November 2021, have been extended 11 times in a row. If international oil prices rise further from their current levels as they struggle ahead of the end of this month, the 12th cut will likely be made. Consumers are now getting 164 won per liter and 20% off gasoline. In the case of diesel, 174 won has been reduced by 30%. If this is restored to its original state, international oil prices will suddenly jump from 1,500 won per liter to 1,700 won per liter. As international oil prices and oil prices have a large impact on prices, the government's struggles are expected to deepen.

[Anchor]
Until now, gas prices seemed to be falling, but now these gains can be quickly reflected. After all, I don't think it's something to take lightly. Then I'll also ask you a question about the global stock market. The New York Stock Exchange continues to be volatile, and I wonder how it will affect our stock market now.

[Lee In-cheol]
International oil prices rose for three consecutive days as Iran and the Middle East war expanded, but in fact, the New York Stock Exchange was hit on the first day. The second day rebounded. But it's falling again at dawn. As a result, on the 3rd, the New York Stock Exchange is losing about 0.17 to 0.4 percent in a day of rebound, and Wall Street's fear index is rising as international oil prices, which say they will attack Iran's oil facilities in Israel, are a destabilizing factor. The big resin has risen by more than 8%. However, the New York Stock Exchange is also in a mixed state only in terms of internal economic indicators.

The weekly employment index was weaker than expected, but last month's service sector index was better than expected. Overall, the internal fundamentals are not bad, but external factors are increasing the volatility of the stock market, and the market's attention is on the 4th, U.S. time. Employment indicators to be released by the Labor Department in August. Because the reason for the big cut now is that U.S. employment indicators have been gradually slowing since July, so how the September data will come out is the biggest variable.

[Anchor]
He said that we should pay attention to volatility because there is a mixture of news that can be accepted as good news and bad news. Let's move on to domestic prices in detail. The price of cabbage and radish is soaring ahead of the kimchi-making season, so why is this rising so much?

[Lee In-cheol]
Who's going to block the weather? Vegetables are very sensitive to the weather as record heat waves and heavy rains overlap. As a result, people are talking about golden cabbage, and the weather is cool now during the kimchi-making season. In this case, housewives have to slowly prepare kimchi, but most of the ingredients for kimchi and ingredients are increasing. Looking at the price of cabbage from the Korea Agro-Fisheries & Food Trade Corporation, it's around 9,200 won as of the 2nd. Of course, there was a 22,000 won bill at a supermarket.That's because the price was not applied with a discount, but anyway, a cabbage is up more than 32% compared to a year ago.

The price of radish jumped more. The price of chives, which is a raw material for green onion kimchi, is close to 14% and 15%, and this month's consumer price index and last month's consumer price index fell to 1% for the first time in three and a half years, but that was entirely due to oil prices. Even if the National Statistical Office announces it now, vegetable prices have risen by 11.5%. So outside the normal price level, it's more than three to four times higher, and what's the problem? Consumers are feeling more anxious as cabbage and radish prices are expected to rise further by October.

[Anchor]
However, if you look at the recent economic news, you can hear that inflation is slowing down and that prices are being caught up, but I don't understand why only vegetable prices are soaring so much.

[Lee In-cheol]
We're talking about golden cabbage this time.It takes only 60 to 70 to 80 days to sow and grow cabbages. So sometimes, the supply and demand are so good that there are situations where you have to change it. As a result, the area of cabbage cultivation is gradually decreasing. On top of that, depending on the weather conditions, even if you bring cabbage dried radish, no matter how good the marketability is, it's not very good, so you have to take off the outside.

As a result, the price of cabbage and vegetables continues to jump. In fact, the area of cabbage cultivation has been reduced by half compared to 10 to 20 years ago. Especially in summer, highland cabbage is mainly grown in Gangwon-do, and Gangwon-do Province rose and lowered 30 degrees until mid-September. As a result, kimchi cabbage is produced nationwide, but a quarter of all cabbages are supplied by Haenam, Jeollanam-do, but the situation in Haenam is not good this year. As a result, not only cabbages but also ingredients are on the rise ahead of the kimchi-making season, and the government believes that if there are no external shocks such as abnormal weather conditions or oil price instability, it will stabilize at the end of this month and early next month.

[Anchor]
But there are factors that are reflected when calculating prices now. There are contents that don't seem to reflect the price of vegetables well.

[Lee In-cheol]
is correct. Since the consumer price index is set based on 459 items and 460 items including industrial products as well as food, industrial products such as petroleum are very high. Currently, in the case of vegetables, the proportion of agricultural, livestock, and fisheries products is only 6.4% based on 100. So, no matter how much agricultural, livestock, and fisheries products we buy at the mart every day experience price fluctuations, but nevertheless, the impact on consumer prices is very limited, which is why the perceived price is quite different from the indicator price.

[Anchor]
Shopping prices may feel different from what you see on the news because the proportion of vegetables is small when calculating prices. Then I'll also ask you about lowering interest rates in Korea. The Bank of Korea's Monetary Policy Committee meeting is a week away, and as household loans are a variable, there are talks about whether interest rates can be lowered or whether they should be frozen again. How do you view it?

[Lee In-cheol]
The Bank of Korea's report is that if the loan interest rate falls by 0.25 percentage points, the nation's housing prices will jump by 0.43 percent, especially in Seoul by 0.83 percent. It means that it will more than double the national house price, and housing prices can rise almost three times the rate cut. So, they are very concerned about household loans and real estate problems. Nevertheless, Lee Chang-yong visited the Ministry of Strategy and Finance for the first time last week. As the governor of the Bank of Korea, I don't have to go to Sejong City. The reason why I visited like that is to cooperate with the policy.

First of all, last month's consumer price index fell within the BOK's 2% management target. 1. It is down to 6%, and of course, the BOK's policy goals are price stability and financial stability. Nevertheless, the effect of the strengthened policy and the unstable movement of the real estate market are likely to be key to the timing of the rate cut, as it previously reported that a cut in lending rates could stimulate housing prices. The BOK's Monetary Policy Committee will remain within this year twice next week, October 11 and December 28. So in some cases, prices are down a lot, so we have to get them down quickly in advance. There are growing calls to get off next week and to delay household debt or real estate problems, but visiting the Ministry of Economy and Finance cannot alone catch real estate or household loans with interest rates. So, I'm interpreting this as a policy to encourage the role of the Ministry of Economy and Finance.

[Anchor]
I'll stop talking to you here. So far, Lee In-cheol has been with the head of the Economic Research Institute. Thank you.