■ This study shows that, as an oil-importing economy, rising oil prices serve to diminish Korea’s household purchasing power and escalate production costs. The level to which economic entities are affected varies greatly depending on the degree of cost shifting.

■ According to the analysis of factors behind oil price fluctuations, the recent oil price hikes are expected to drive up both the rates for economic growth and inflation in 2021.

■ The gradual improvement in the global economy will have a positive effect on the Korean economy. However, the protraction of the Covid-19 crisis and less-than-desirable recovery of the domestic economy means that policy action must be considered to mitigate the negative impact from rising import prices, where necessary.

■ In the long run, consistent efforts should be made to reduce the impact of global oil shocks on the Korean economy, and to also lower its dependence on crude oil and petroleum products so that it can cope with climate change.