International oil prices are expected to reach $100... Will the "high oil price era" return?_Indu...

[Anchor Commentary] If you go to a gas station these days, you'll notice that gas prices are noticeably higher than last year. International oil prices are soaring, fueled by increased global demand. This is why some predict we're entering a "high oil price era." Let's take a closer look on this week's Industrial News. Seoul Economic Daily reporter Cho Yang-jun is in the studio. Hello, reporter Cho Yang-jun. First, let's take a look at the recent oil price trends and the overall situation. International oil prices have risen significantly, haven't they? [Reporter] International oil prices have risen sharply this year. The prices of the three major crude oil grades—Brent crude, West Texas Intermediate crude, and Dubai crude—are all above $70 per barrel. This represents a more than 70% increase compared to last year, when the average price for each grade was around $40. You may remember that oil prices temporarily fell into negative territory last year due to the economic downturn caused by COVID-19. Last April, the price of West Texas Intermediate crude oil for May delivery was -$37 per barrel. This means oil prices have risen by more than $100 in just over a year. It doesn't stop there. Some even forecast that oil prices will soon reach the $100 per barrel mark, or about 110,000 won in Korean currency. This is the forecast from US financial institutions such as Bank of America and Goldman Sachs. An analysis has also found that "the current rate of increase in global oil consumption is faster than in the 1970s." Domestic and international research institutes are also raising their oil price forecasts. Of course, many predict that it remains to be seen whether oil prices will actually continue their upward trend. The recent resurgence of COVID-19 variants, which could slow the pace of economic reopening, is a major variable. Nevertheless, the general consensus is that oil prices are clearly on the rise. [Anchor] But what is the reason for these rising oil prices? [Reporter] As I mentioned earlier, the biggest reason is that the global economy is beginning to emerge from the COVID-19 recession. As COVID-19 vaccinations accelerate and economic activity resumes, oil demand is increasing, leading to higher prices. In fact, not only crude oil but also other raw material prices are steadily rising. The CRB Index, an international raw material price index, reached 220 points as of the end of June, up about 20% from the 180 points range a year ago. This is a nearly double increase compared to the 110 points range in April last year, when the COVID-19 pandemic was at its peak. Individual commodities are similarly affected, with significant increases such as copper (54%) and iron ore (128%). The rise in other raw material prices can also be attributed to the reopening of the global economy. Supply is just as important as demand in determining prices. This is why we must pay close attention to the movements of oil-producing countries. In fact, the OPEC+ group, a group of major oil-producing countries, is still gradually reducing production. Last year, when crude oil demand plummeted due to the impact of COVID-19, OPEC+ decided to reduce crude oil production by 9.7 million barrels per day, effectively cutting production. This was the largest cut ever. Since then, the reduction has been gradually reduced, and recently, discussions are underway to increase the reduction to 500,000 barrels per day. [Anchor] The industry is likely keeping a close eye on rising oil prices. Each industry will likely react differently, right? [Reporter] In summary, the oil refining industry is experiencing a complex and nuanced situation, while the aviation and shipping industries are grumbling, and the shipbuilding industry is smiling. Typically, the oil refining industry benefits when oil prices rise. This is because it can purchase crude oil when prices are low and sell petroleum products at higher prices. Domestic refineries, such as SK Innovation and S-Oil, recorded large surpluses in the first quarter of this year. The problem is that refining margins, a key profit indicator, remain low. As of the second week of May, Singapore's complex refining margin stood at $1.30 per barrel, well below the break-even point of $4-5 per barrel. Petrochemicals are expected to see profitability deteriorate due to rising costs, as the price of naphtha, a raw material derived from crude oil, rises alongside rising oil prices. The transportation sector is also facing a dark cloud. For the airline industry, already suffering significant losses due to the COVID-19 pandemic, which has virtually halted international flights, rising fuel costs are a detrimental factor. Industry analysts estimate that a $1 per barrel increase in oil prices could result in annual losses for airlines exceeding 30 billion won for major carriers. Even the booming shipping industry, with average ocean freight rates more than tripling in the second quarter of this year compa...