Despite Fuel Tax Cuts, LPG Prices Rose but Have Now Peaked

December LPG Price Drop... Domestic Selling Prices Expected to Decrease as Well

On the 12th, when the government's six-month temporary 20% fuel tax reduction began, a gas station in downtown Seoul was quiet. According to government authorities, from this day, the fuel tax on gasoline was reduced from 820 won per liter (ℓ) to 656 won, diesel from 582 won to 466 won, and LPG butane from 204 won to 164 won. It is expected to take about 1 to 2 weeks for the fuel tax reduction to be reflected in consumer prices. Photo by Moon Honam munonam@

[Asia Economy Reporter Hwang Yoon-joo] Despite the decline in oil tax, international LPG prices, which had been on the rise, took a downturn in December. In particular, butane prices dropped by $80 per ton within a month, and domestic LPG prices are also expected to fall significantly in January next year.

According to the industry on the 26th, based on Saudi Arabia's contract prices for December this year, propane was priced at $795 and butane at $750, down $5 and $80 respectively from the previous month.

LPG has risen to third place in total product consumption (13.3%) after naphtha (48.3%) and diesel (17.6%), surpassing aviation fuel since COVID-19. It is mainly used as taxi fuel and is one of the products that significantly impact the everyday economy.

The main reason LPG prices have been soaring is the rise in international LPG prices. Domestic selling prices are determined based on the previous month's Saudi Arabia contract prices. In November, the international price of propane was $870, the highest in 7 years and 9 months since February 2014 ($970), and butane was $830, the highest in 7 years and 4 months since July 2014. Although the recent oil tax reduction lowered LPG prices by 69.6 KRW per kg, LPG importers SK Gas and E1 raised domestic supply prices by 88 KRW per kg in December.

The import unit price of LPG also appears to have some influence. According to the Korea National Oil Corporation, as of cumulative data up to October this year, the top LPG import country was the United States (73.43 million barrels), followed by Canada (2.32 million barrels), Qatar (940,000 barrels), United Arab Emirates (810,000 barrels), and Saudi Arabia (540,000 barrels). The average import prices from the US and Canada were $51.3 and $53.9 respectively, slightly higher than those from the UAE ($49) and Saudi Arabia ($48.4).

An official from the refining industry said, "International LPG prices are based on Saudi Arabia's contract prices, and it is estimated that Saudi Arabia maintains LPG margins to defend against gasoline price declines," adding, "With the contract price drop in December, domestic LPG selling prices are also expected to fall in January next year."

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