Government Urges Industry to Immediately Reflect Effects of Fuel Tax and LNG Tariff Reductions

[Sejong=Asia Economy Reporter Kwon Haeyoung] The government has requested the industry to promptly reflect the effects of the reduction in oil tax and liquefied natural gas (LNG) allocation tariff so that consumers can immediately feel the impact.

On the afternoon of the 27th, the Ministry of Trade, Industry and Energy held an emergency inspection meeting on the oil and gas market at the Coal Hall in Jongno-gu, Seoul, chaired by Yoo Beopmin, Director General of the Resource Policy Bureau, to discuss related measures including this matter. Attendees included officials from Korea National Oil Corporation, four refiners (SK Energy, GS Caltex, S-Oil, Hyundai Oilbank), three discount supply companies (Korea National Oil Corporation, Nonghyup, Korea Expressway Corporation), Korea Gas Corporation, and LNG direct importers (SK E&S, GS EPS, POSCO Energy, Korea Zinc).

Considering the burden on the economy of ordinary citizens and industry production activities due to rising crude oil and natural gas prices, as well as upward pressure on prices such as city gas fees, the government decided to temporarily reduce oil tax and LNG allocation tariffs for six months from December 12th this year to April 30th next year. The oil tax will be cut by a record 20%, and the LNG allocation tariff will be lowered from the current 2% to 0%. Assuming the 20% oil tax reduction is fully reflected in consumer prices, gasoline will decrease by 164 KRW per liter, diesel by 116 KRW per liter, and LPG butane by 40 KRW per liter.

For city gas rates applied to power generation companies and industrial users, the effect of the allocation tariff reduction will be reflected in the rates starting December. As a result, the cost of products and power generation will decrease, contributing to the stabilization of electricity rates and product prices. Residential city gas rates will, in principle, be frozen until the end of the year.

The key issue is how quickly the reduction in oil tax and LNG allocation tariff is actually reflected in market prices. Petroleum products typically take about two weeks to be distributed from refineries to gas stations, and oil tax is imposed at the moment the product leaves the refinery. Therefore, there is a time lag before the oil tax reduction is reflected in the selling price. Ultimately, refiners need to minimize this lag through inventory management and cooperation with gas stations so that consumers can feel the effect of the oil tax reduction as soon as possible.

Similarly, LNG importers and Korea Gas Corporation must immediately utilize the tariff reduction as a cost-saving factor to lead to actual price reductions.

At the meeting, Director Yoo requested the refining industry and discount supply companies to actively cooperate so that consumers can purchase products at prices reflecting the reduction immediately after the oil tax reduction measure is implemented, fully aligning with the purpose of the measure. He also urged LNG direct importers to actively use the LNG allocation tariff reduction as a means to reduce power generation costs and product prices.

The Ministry of Trade, Industry and Energy plans to announce the oil tax reduction through Korea National Oil Corporation’s OPINET on the day the temporary tax reduction measure takes effect and monitor domestic petroleum product selling prices. Additionally, it will take measures to ensure that the LNG allocation tariff reduction is continuously reflected in power generation and commercial city gas rates for six months starting in December.

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