Younghoon Kim – Daesung Group CEO
As the price of oil increases, emergency countermeasures also increase. There will be a tax cut for oil and a decrease in the levy on oil imports. And when the price of oil increases, a 10th-day-no-driving system will be implemented by force, and conservation protocols for streetlamps, elevators, and neon lights will likely go into effect. However, just like everything, countermeasures take time. Everyday preparation is consequently less costly and more effective.
Zhuge Liang won most of his battles with splendid strategies and tactics, but ultimately lost his most important war. In the Romance of the Three Kingdoms, the state of Shu Han had the advantage over other countries in terms of its location and that it could never be invaded; therefore, the best strategy for its kingdom was to lock its gates, ensure internal stability, and strengthen its power. Zhuge Liang, However, memorialized the Emperor during two separate expeditions, raised troops several times, and impoverished its power, resulting in his criticism, by some, for eventually creating conditions vulnerable to battles.
It is often considered that Korea’s energy issue is also in this condition. Even though Korea does not have the ability to produce oil, the country’s energy prices are relatively inexpensive.
We end up using and wasting so much energy that during the winter many people only wear their underwear in their homes because it is too warm. People also point out that the reason energy-guzzling industries, such as steel, petrochemistry, and the cement industry, are so prolific Korea, is that the energy market has been relatively inexpensive.
An increase in price is hard to realize however, because many public utility charges are deeply connected to the energy market. Electric charges, gas charges, and district heating charges are all regulated by the government. As a result, the correct amount of taxes, if imposed on certain types of oil, such as diesel, could place excessive pressures on the lives of everyday people through additional bus fees or increased freight rates,.
We import 97% of the total energy we use. We are the fourth largest oil-importing country and sixth largest oil-consuming country in the world. There is a strong feeling, however, that the fees linked to energy are politically regulated. If that is the case, it is better to leave it to the market to formulate a reasonable price
The energy-saving business, ESCO, does not work well in Korea. For example, the energy-saving technique of cutting the power to lighting and cooling systems, by automatically sensing the presence of people in a building after office hours, is widely utilized in overseas countries, but not so much in Korea.
The levy on oil imports is used for developing oilfields and establishing oil stockpiling facilities. The government, however, has recently been trying to deduct its price as a countermeasure for high oil prices. This is not desirable.
In such conditions, we should not be negligent in making long-term decisions to solve the fundamental problems of suppliers, such as overseas oil field development and stockpiling of oil. Just as we cannot eat rice seeds when food is scarce, because we need those seeds to grow more rice in the future; even though we don’t have much now, we need to prepare and save, little by little for our future.
Therefore, energy fees should not be excessively regulated. If people in the energy business disturb the market order and damage fair competition through unreasonable profits, price fixing and collusion, there should obviously be strong enforcement actions taken against them. The government, however, will have to faithfully lead the market with acceptable prices and consumers will have to react to those prices reasonably. Moreover, the cross-subsidization that often occurs between different energy business types and the distortion of relative price systems should be minimized.
Source: Hankyung Magazine
