Korea will seek to gather international efforts to tighten rules on derivatives trading, the finance ministry said on Sunday, pledging to fight speculative investments in crude oil.
“Korea, as a major importer of crude oil, will urge the international community to cooperate in stabilising oil prices,” its report said. It assessed volatile crude prices as a major threat to global growth and called for concrete regulatory measures to tame the speculative forces in the next two Group of 20 meetings in April and June.
The report comes as Korea, the world’s fifth largest crude buyer, foresees crude volatility as the next big external risk likely to grow due to Iran’s nuclear programme and a drop in supply of the Organisation of Petroleum Exporting Countries.
“Over the short haul, an international clampdown on speculation should be strengthened though the distribution structure of the oil market should be made more transparent in the long term,” it said. Finance chiefs of G20 nations are scheduled to meet on April 19-20 in Washington, D.C. and on June 18-19 in Los Cabos, Mexico.
The report cited recent developments to fight speculative derivatives in the US and UK, where bills to regulate such forces have been blocked by opposing political parties and finance industry lobbyists. Policymakers across the world share the concern that the climb of crude prices in the futures market is due to growing fear of a military confrontation with Iran in the Persian Gulf’s Strait of Hormuz, through which 20 percent of the world’s oil passes. As tension between US and Iran ratcheted higher, the price of oil leaped more than 20 percent this year
Brent crude has climbed to a high of $123 a barrel in the futures market this year.
The finance ministry has said it plans to roll out a set of subsidies for those who make a living through oil should the price stay above $130 a barrel for more than five working days.
It has coordinated with the Korea Exchange to open the country’s first electronic oil spot market in March to help make distribution more transparent. Major oil brands such as SK, GS, HD and S-Oil as well as oil importers and exporters and outlets are allowed to make transactions between 10 a.m. and 4 p.m. Sellers on the electronic oil market are given up to 0.3 percent in a tax incentive. The government has been running more than 350 bargain gas stations since December, which offers fuel slightly cheaper by taking the oil from state-run agencies.