South Korea’s ‘energy inflation’ hit 25-year high in January

SEOUL – South Koreans have faced surging electricity, gas and heating bills, with the January inflation index hitting a new high since the 1998 financial crisis.

According to the Korean Statistical Information Service on Sunday, the public utility price index — calculated based on the consumer price index that is considered an inflation barometer — logged 135.75 points in January, up 31.7 percent from the same month last year.

This indicates the highest on-year inflation of monthly energy prices that Korea has seen since April 1998, when there was a 38.2 percent on-year surge during the financial crisis.

The figure also means that the burden for Koreans paying energy bills increased greatly over a year.

According to the index, electricity prices, in particular, rose 29.5 percent on-year in January, which is the largest on-year jump since January 1981, when the price rose 36.6 percent.

Gas prices rose 36.2 percent and heating prices jumped 34 percent — the highest figure since relevant data started to be compiled in 2005.

The price of kerosene, which is mainly used by people who live in houses that cannot supply gas, rose by 37.7 percent from a year ago.

These hikes are the byproduct of the increase in international prices for liquefied natural gas that began in March 2021 and were further aggravated by Russia’s invasion of Ukraine in February 2022.

In these difficult global circumstances, the state-run Korea Electric Power Corp. and Korea Gas Corp. were left with no choice but to raise rates last year.

Electricity rates, raised three times just last year, in April, July and October, were raised once again last month, by 13.1 won ($0.01) per kilowatt-hour, up 9.5 percent from the previous quarter.

Although the government froze gas rates in the first quarter of 2023, it is still considered burdensome for many Koreans as the price was raised four times last year, in April, May, July and October.

Moreover, Koreans are likely to suffer from high energy bills, as the two state-run companies say that 51.6 won per kilowatt-hour of an electricity rate hike in total and 8.4 to 10.4 won per megajoule of a gas rate hike in total is necessary this year.

The KOSIS numbers also showed that although overall consumer price peaked at 6.3 percent on-year in July last year and is decreasing, the inflation trend for food and nonalcoholic beverages is still on an upward trajectory.

This means that Koreans are still likely to feel a mounting inflation burden on a daily basis.

In January, food and nonalcoholic beverage prices rose 5.8 percent on-year. This rate was bigger than the 5.2 percent hike that Korea saw in December last year.

Also, when compared with the previous month’s figure, food and nonalcoholic beverage prices in January rose 1.7 percent, the highest since February 2021.

Meanwhile, in December last year, the government estimated 2023’s inflation at 3.5 percent.

However, as inflation for January surpassed 5 percent, some industry insiders see that it might be difficult for the Korean government to secure the expected inflation level.