[News Today] High oil prices drive inflation

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The conflict in the Middle East continues to add to the pressure people feel from rising prices.

A new analysis shows that if high oil prices persist, this year's inflation rate could rise by as much as 1.6 percentage points.

[REPORT]

Convenience stores have raised international parcel delivery fees by 7% from this month,

because of the soaring fuel surcharges.

This is just one example of how rising international oil prices are causing overall consumer prices to spike.

The state-run Korea Development Institute has analyzed the impact of high oil prices on inflation.

The results show that if oil prices remain at their April levels through the end of the year, they could push this year's inflation rate by up to 1.6 percentage points and next year's by 1.8 percentage points.

Even if international oil prices stabilize in the second half of the year, consumer prices will rise by 1 percentage point.

Analysts say prices are reacting more sensitively because of the unprecedented disruption in crude oil transportation.

In February, before the Middle East conflict began, the KDI predicted the inflation rate would record 2.1% this year.

But reflecting the analysis, inflation this year could rise to the upper 3% range.

However, this estimate does not take into account the effects of the fuel price cap and fuel tax cuts.

Ma Chang-seok / Korea Development Institute

Inflation forecast falls below 3% because it excludes the fuel price cap. If it’s also taken into account, inflation could reach 3%.

Deputy Prime Minister for Economy Koo Yun-cheol has reiterated that the government plans to keep the fuel price cap in place until the situation in the Middle East stabilizes.