Brent Crude Breaks $100 Again…Sugar Prices Also Soar

Overnight on the London exchange, Brent crude futures closed at $101.21 per barrel, up 3.36% from the previous session. This marks the first time it has recovered the $100 level in about a month and a half since July 23. West Texas Intermediate (WTI) crude prices also entered the $96 per barrel range, indicating a clear upward trend in overall international oil prices.

As Yemen's Houthi rebels attack the Red Sea route, a crucial oil export channel for Saudi Arabia, a sense of crisis is escalating simultaneously in the Strait of Hormuz in the Persian Gulf and the Bab-el-Mandeb Strait. These two straits are critical routes through which approximately one-third of global seaborne crude oil traffic passes. Concerns have been raised that the conflict between Saudi Arabia and Yemen's Houthi rebels, following the U.S.-Iran standoff, will emerge as a new front and severely impact the global crude oil supply chain.

Saudi Arabia began military intervention in Yemen in 2015, and airstrikes, which resumed recently after a 2022 ceasefire, are now spiraling into an all-out war. Such structural conflicts are further exacerbating instability in the Middle East.

The Jazan Aramco refinery and export terminal is a frontline base for Red Sea exports. The recent missile attack has raised the possibility of some facilities shutting down, increasing concerns about crude oil supply instability. This is expected to have significant ripple effects on the international crude oil market.

Saudi Aramco is the largest shareholder of domestic refiner S-OIL, and S-OIL imports most of its crude oil from Saudi Arabia. If Aramco's export network is attacked and disrupted, S-OIL could face a double burden of rising crude oil procurement costs and a supply emergency. If the situation prolongs, it could also negatively impact domestic energy security.

While on-site purification was previously the principle, regulations will be eased to allow off-site purification at specialized facilities for public interest projects. The aim is to enhance the efficiency of soil contamination purification.

It is generally the new constructor's responsibility to bear the cost of contamination purification. This amendment is expected to lower the threshold for off-site purification, departing from the previous principle of on-site purification at the contamination source.

The main reason for previously restricting off-site purification of contaminated soil was the judgment that moving contaminated soil to other areas could create additional environmental risks. There was a possibility of pollutants scattering during transportation, storage, and treatment, or environmental burdens being transferred to other regions, and opposition from residents was also a significant consideration. Addressing these concerns is the task of this regulatory relaxation.

The Environmental Health Technology Research Institute analyzed that it would take 1 year to 1 year and 3 months if 100 trucks are deployed daily. However, the criteria for public interest projects depend on government and public judgment, and consultation with the U.S. military and public discussion procedures are also required.

This amendment is perceived as merely establishing institutional means, separate from the immediate commencement of actual projects. Who will bear the enormous purification costs is also expected to be a significant variable.

In particular, it showed a steep rise, including a 21% surge in August alone. This is adding cost burden to industries across the board that produce sugar-related products.

The August sugar price increase was the largest monthly rise in 16 years. This led to the UN Food and Agriculture Organization (FAO) food price index reaching its highest level since November 2022. The sharp rise in sugar prices was a major factor driving overall global food prices upward.

One of the main causes of the sugar supply shortage is the poor sugar beet harvest due to Europe's heatwave. The prolonged heatwave across Europe last summer severely impacted sugar beet fields, a temperate climate crop. The European Union's (EU) sugar production for the next season is projected to decrease by 19% compared to last year, which is expected to significantly affect global sugar supply and demand.

70% of sugar production comes from sugarcane, and India is also experiencing poor sugarcane yields. India has decided to import 1 million tons of raw sugar tariff-free for the first time in 10 years, making efforts to address the supply shortage.

Sugarcane factories in Brazil choose to produce either sugar or ethanol, depending on which is more profitable. This year, as international oil prices soared due to the Middle East situation, ethanol production became more profitable, leading to an increase in conversion from sugar to ethanol production, further reducing sugar supply.

Since most processed foods contain sugar, changes in international sugar prices inevitably directly impact domestic food prices. Global sugar supply instability poses a risk of price increases being passed on to domestic consumers.

The necessity of government intervention is being raised to ensure the stable supply of essential items like sugar for human survival.

International grain prices also surged rapidly due to the escalating Russia-Ukraine war, heatwaves in the American grain belt, and reduced grain production in Europe. Logistics disruptions in the Black Sea region and damage to major production areas have reduced global grain supplies. This, combined with increased transportation costs for distant importing countries, adds to import burdens and contributes to overall inflationary pressure.