A fear of energy inflation is sweeping the world. Prices have jumped not only for oil and natural gas, but also for coal, fanning inflation worries. To make matters worse, the global economy is showing signs of faltering. Negative factors caused by the COVID-19 pandemic, such as disruptions in transportation and logistics services, energy crises and growth slowdowns, are happening simultaneously.

The US West Texas Intermediate for November delivery rose to $78.93 a barrel on the New York Mercantile Exchange on Tuesday. During the session it surged to as high as $79.48, the most in nearly seven years. Brent futures climbed to a three-year high, settling at $82.56. The oil price surges came after the OPEC Plus group of producers decided to maintain its planned output increase that it had cut last year. Some economists expect the global energy crunch to propel oil prices above $100 a barrel this winter, their highest since 2014.

To top it all, prices for other raw materials have soared, too. The Bloomberg Commodity Spot Index, which tracks 23 energy, metals and crop futures contracts, rose 1.1 percent on Monday, topping a 2011 record. Natural gas contracts hit new highs in Europe. Futures contracts jumped to a 12-year high in New York. Futures for coal soared to fresh record highs this month.

Soaring international prices for energy and raw materials have great influence upon consumer prices. South Korea’s consumer prices rose 2.5 percent in September from a year earlier, according to Statistics Korea on Tuesday. Inflation stayed over 2 percent on-year for a sixth straight month. Prices are expected to rise further in the fourth quarter when the electricity rate is scheduled to be raised.

High prices are being accepted as an established fact. The Bank of Korea raised its 2021 inflation outlook to 2.1 percent from its earlier estimate of 1.8 percent. Federal Reserve Chair Jerome Powell said a bout of high US inflation could be prolonged into early next year. Now a few economists are talking about stagflation, a period when sputtering economic growth coincides with rising inflation.

If growth is solid, slight inflation will be inevitable. But the current situation is fraught with unprecedented uncertainties stemming from the COVID-19 pandemic. South Korea’s industrial output, retail sales and facility investment all decreased in August. It is the first time in three months that all three indices representing production, consumption and investment fell at the same time. 

Triggered by the energy crisis, economic indices point to stagflation. The best solution is to propel growth through innovation and productivity improvement, but skyrocketing property prices and the ascent of international prices for energy and raw materials are in the way.

The mounting household debt, fueled by excessive liquidity pumped into the market due to COVID-19 and stimulated by soaring home prices, is one of the big obstacles. In a bid to prevent a bubble from forming, financial authorities are tightening household loans. The central bank raised the benchmark interest rate in August in response to snowballing debt and surging prices. Debt is not a problem only for households. Public-sector debt is snowballing, too.

Particularly, China, South Korea’s main trading partner, is a country to watch. Power shortages in China -- the “world’s factory” -- are threatening to knock down the global ecosystem of supply chains. If production in China suffers a serious blow from price hikes for energy and raw materials, significant damage to South Korea’s trade will be inevitable. Disruptions in transportation and logistics industries are already afflicting South Korea’s exports. Hyundai Motor and its affiliate Kia are seeing their overseas sales falter due to the dearth of chips.

Government and businesses must put their heads together to repel fear of inflation looming over South Korea and overcome the economic impact of the pandemic. A thorough response to the unprecedented crisis is required. Above all, they must prevent the worst scenario where inflation turns into stagflation.