Prepare for prolonged war by managing energy demand

Higher oil prices and a weaker won are already pushing up import costs, stirring inflationary pressure across the economy. According to figures released by the Bank of Korea on Wednesday, import prices in February rose 1.1 percent from the previous month and 1.2 percent from a year earlier. Crude oil prices jumped 9.8 percent. Since the war involving Iran has driven international oil prices even higher in March, import prices are likely to continue rising this month as well. Import costs do not stop at the border. They filter through, with some delay, into corporate production expenses and eventually into consumer prices.

Inflation has a direct effect on daily life. That is why the government must respond firmly to attempts to exploit market anxiety. Hoarding scarce goods or imposing excessive price hikes should not be tolerated. The government announced last week that it would place 23 items closely tied to people’s livelihoods under special management. They include petroleum products, which are currently subject to a maximum price system, as well as staple foods such as rice and basic necessities such as school uniforms and sanitary products, all items President Lee Jae Myung has publicly singled out. Price increases driven by collusion, unfair trade practices or outdated distribution structures should be thoroughly rooted out.

At the same time, as this page has already argued, a price cap on petroleum products should remain only a short-term emergency measure. Such a policy can distort resource allocation and, if prolonged, may create new side effects. In that respect, it is encouraging that the government has begun to place greater emphasis on demand management for energy.

At the Cabinet meeting on Wednesday, President Lee instructed officials to prepare measures on the assumption that the Middle East crisis could be prolonged and even to plan for the worst-case scenario. He called for steps to reduce energy demand, including possible driving restrictions based on vehicle plate numbers. His point was clear: The country cannot rely only on attempts to suppress prices while ignoring the need to reduce consumption.

Lee was also right to suggest that direct fiscal support for vulnerable groups would be preferable to cutting fuel taxes. A fuel tax cut may provide immediate relief, but it also encourages greater oil consumption at a time when conservation is needed. That makes it a blunt and inefficient tool.

NH Financial Research Institute has likewise warned that if the war drags on, government control of oil demand may become necessary. It cited measures such as odd-even driving rules, encouragement of remote work and limits on late-night business operations. If the government is serious about preparing for the worst, it should ready a broad menu of energy-saving policies now. Demand management may be inconvenient, but it is likely to be more sustainable and more effective than trying to hold back reality with price controls alone.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.