Seoul: The government has activated an emergency response system as the war in the Middle East continues to drag on. This is because the negative impact of the Middle East crisis on people's daily lives is beginning to take hold in earnest. It is common sense that modern life is impossible without petroleum and petrochemical products, and not only for transportation and heating. Amid uncertainty over the war's trajectory, it is prudent for the government to take preemptive action.
According to Yonhap News Agency, starting Wednesday, the government mandated a five-day vehicle rotation system for public institutions, restricting use by license plate numbers. The system will remain voluntary for the private sector, while promoting 12 energy-saving measures for the public, including greater use of public transportation and appropriate indoor temperature settings. If conditions worsen, the government plans to consider extending the mandate to the private sector.
The government has asked 50 major petroleum-consuming companies to draw up energy-saving plans. It will also recalibrate the energy mix to curb liquefied natural gas consumption, including easing constraints on coal-fired generation and restarting some nuclear reactors now in maintenance.
As the war in Iran disrupts supply chains for crude oil and a wide range of petroleum- and gas-derived raw materials, signs are emerging that the shock is spreading across the broader industrial sector. Naphtha, derived from the crude oil refining process, is a key feedstock for a wide range of petrochemical products, including plastics and synthetic fibers. Some 45 percent of Korea's naphtha imports come from the Middle East, but shipments have been disrupted by the blockade of the Strait of Hormuz. As a result, operating rates at major domestic naphtha cracking facilities have recently plunged to the 60 percent range from the usual 80-90 percent.
Disruptions in naphtha supply could trigger a chain reaction across downstream industries - including construction, automotive, and electronics - where key materials are closely tied to petrochemical products. The item that warrants the closest attention is helium. It is a critical material used in the etching and cooling of semiconductor wafers. The price of helium has surged by more than 40 percent after the Ras Laffan plant in Qatar, which produces roughly one-third of the world's helium, halted operations. Korea relies on Qatar for 65 percent of its helium imports; a prolonged conflict would deal a direct blow to the semiconductor sector.
The crisis has now expanded beyond energy, engulfing industrial raw materials across the board. According to the Korea Institute for Industrial Economics and Trade, if the Strait of Hormuz remains closed for more than three months, average production costs in the domestic manufacturing sector would rise by 11.8 percent, undermining the broader economy.
The war in the Middle East stands at a critical juncture between de-escalation and further escalation, but the prolonged disruption to energy supplies caused by damage to regional infrastructure must now be seen as a reality. There are growing projections that it will take years for damaged energy facilities to be fully restored to normal operations.
There is an urgent need to secure alternative supply chains for high-impact items such as helium and naphtha. The government must closely monitor market conditions for items facing supply concerns. The price cap on petroleum products should be withdrawn at an appropriate time, as it is likely to distort the market over the medium to long term. The emergency measure, which took effect on March 13, was introduced to curb price spikes artificially by placing a ceiling on the consumer prices of petroleum products supplied by refiners to gas stations and distributors.
No one knows how far the repercussions of the Middle East war will extend. The government must implement comprehensive contingency plans and devote all its efforts to minimizing the impact of the energy crisis on the real economy.