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By Kwak Yeon-soo
International oil prices are likely to continue on an upward spiral in the wake of the U.S.-Iran conflict triggered by Friday's drone assassination of the head of Iran's elite Quds Force Qasem Soleimani, according to market experts, Sunday.
They expect this will lead to a spike in local gasoline and diesel prices, putting an additional burden on the Korean economy.
The price of gasoline increased for the seventh consecutive week in the first week of January to 1558.7 won ($1.34) per liter, up 4.6 won from the previous week. The price of diesel increased for the sixth consecutive week.
Experts expect that oil prices will undergo wild fluctuations for some time but will not stay elevated for long.
According to online oil price tracker oilprice.com, Friday, West Texas Intermediate (WTI), the international benchmark, gained 3.06 percent, reaching $63.05 a barrel following the coordinated attack on the top Iranian general.
"It is inevitable for oil prices to soar in the short term because such attacks exacerbate tensions within the Middle East," KB Securities economist Kim Doo-un said.
However, he predicted there would be smaller price increases compared to the aftermath of drone attacks on Saudi Arabia's Abquaiq and Khurais oil facilities in September last year, which shut off about 5 percent of the world's crude oil production. Back then, WTI rose 9.8 percent.
"Investors are worried that the situation in Iran may worsen, but I don't think this will lead to a war between the U.S. and Iran. Thus, it won't lead to a long-term rise in the international oil prices," he said.
Kim mentioned that although the U.S. is seeking to become an energy superpower, its upcoming trade deal with China would ease tensions, playing down negative investor sentiment.
SK Securities said Iranian retaliation will likely stop short of a war.
"The recent attacks will not significantly disrupt crude supplies in the long term, but considering Washington's tougher stance toward Iran, we need to closely monitor how the two make their next moves," SK Securities economist An Young-jin said.
An explained that the Trump administration has had sour relations with Iran since it left the Iranian nuclear deal and imposed severe economic sanctions against the Middle Eastern country in 2018.
Conflicts escalated following Iran's shooting down of an American drone in June and the attack on Saudi Arabia's oil facility in September.
However, experts said the U.S. air strike will have limited impact on the country's refineries as many of them have been decreasing their quota of imports from Iran since May 2019 following the U.S. sanctions.
"We are not affected by the U.S. air strike in Iraq," an official at a refining company said, declining to disclose the volume of Iranian crude oil it imported.
"It could put pressure on refining margins, but they are not directly proportional to changes in crude oil prices."
According to KITA, Korea imported 58.2 million barrels of crude oil from Iran in 2018. The figure accounted for 4.8 percent of the nation's entire oil imports. Oil from Iran has been banned since May 3 last year following the U.S. sanctions on the country.
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