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Oil Price Rollback May Make or Break Korea Following Global Low Demand, Expert Warns

By January 14, 2016 at 8:27 am
Oil price stand (Photo : Sean Gallup/Getty Images News)

While the price of oil becomes cheaper, an economist warns South Korea of its domestic benefits and global risks.

Hi Investment & Securities chief economist Park Sang-hyun said on Wednesday that the decreasing price of oil may help domestic investments and expenditures, but can worsen global state that may tumble down the country's effort.

"Tumbling oil has mixed effects on Korea from a macroeconomic perspective," Park said, according to Korea Herald. "To understand this, one needs to understand what drives oil prices down."

The oil price drop is an advantage for local businesses, especially those that are relying on fuel input. Even consumers can gain from a cheaper price as their purchasing power can be strengthened. However, given that Korea is one of the biggest oil importer of the world, they country may also suffer from global economic scare.

One of the reasons why the oil prices plunge down is the low demand worldwide along with China struggling an economic slowdown, Korea Times noted.

Korea's economy is affected by such situation as it also depends on export. Dubai crude, which is the country's crude oil benchmark, has suffered from a 12-year low with $26 per barrel.

The U.S. West Texas Intermediate, also an oil benchmark, has plunged to $30 per barrel for the first time. Experts speculate that the price may reduce further to $20 per barrel. The Standard Chartered oil can go lower at $10.

"Last year, despite a significant fall in oil prices, Korea's economy struggled because weak demand weighed down on exports," said Hyundai Economic Research Institute economist, Lee Jun-hyuk.

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