Middle East War Drives Up Oil Prices: 46% of Daegu Companies Report "Severe Impact"... 59% Unable to Raise Prices Despite Rising Costs

Daegu Chamber of Commerce Surveys 445 Companies

Most companies in the Daegu region are experiencing a significant increase in management burden due to the rise in oil prices caused by the Middle East war. In particular, despite the increase in costs, many companies are unable to reflect these costs in their selling prices, resulting in deteriorating profitability.

According to a survey conducted by the Daegu Chamber of Commerce and Industry (Chairman Park Yunkyung) of 445 companies in the Daegu area (with 234 responding, conducted from April 15 to 16) on "The Impact of Rising Oil Prices Due to the Middle East War," 97.9% of respondent companies answered that "corporate management is being affected." Among them, 46.2% said the "impact is very significant," indicating that the increase in oil prices is having a direct effect on business operations.

Daegu Chamber of Commerce and Industry

Regarding the overall level of cost increases due to rising oil prices, 43.2% of respondents selected "10–20%" as the most common answer. By industry, manufacturing experienced a relatively lower increase, while construction and distribution/service sectors saw a comparatively higher proportion of cost increases.

In particular, the main items contributing to the increase in costs were "raw and subsidiary materials" (63.2%) and "logistics and transportation" (26.1%), indicating that the rise in oil prices has spread beyond simple energy costs to drive up expenses throughout the entire supply chain.

Despite these rising costs, many companies were unable to reflect the increases in their product prices. When asked whether they could reflect increased costs in their supply prices, 59.0% answered that they "could not reflect the costs," exceeding half of the respondents. The difficulty in reflecting costs was especially pronounced in the distribution and service industries.

The main reasons cited for the difficulty in reflecting costs were: "concern over decreased sales if prices are raised" (41.3%), "clients refusing unit price increases or lack of negotiating power" (23.2%), and "inability to adjust prices due to contract structure not allowing cost-linked adjustments" (14.5%). These were followed by "difficulty adjusting unit prices due to long-term contracts" (10.1%), "industry-wide price freeze sentiment" (6.5%), and "other reasons" (4.3%).

To respond to rising costs, companies most frequently selected "negotiating unit price increases with clients" (59.8%) and "reducing operating expenses" (56.0%).

Notably, most companies (88.9%) believe that even if oil prices decline in the future, it will be difficult for their increased costs to return to previous levels.

When asked about the impact of rising oil prices on this year's business performance, 96.6% of responding companies said that their operating profit would decrease, with 37.6% expecting a significant decrease. This was followed by "a slight decrease" (59.0%) and "no impact at all" (3.4%).

Accordingly, companies cited "support for oil and energy costs" (52.1%), "emergency operating fund support" (21.4%), and "expansion of the supply price indexation system" (12.4%) as key policy supports needed, indicating that direct cost relief is an urgent priority.

Bogeun Kim, Head of the Economic Research Department at the Daegu Chamber of Commerce and Industry, stated, "The current rise in oil prices is not merely a temporary increase in costs but is acting as a structural burden on overall corporate profitability. Even if oil prices decline in the future, there is a possibility that the increased costs will become fixed, so policies to provide short-term support for energy costs as well as to enhance the structural stability of the entire supply chain are needed simultaneously."

This content was produced with the assistance of AI translation services.