Gasoline Prices Rise for 25 Consecutive Days in the New Year... Weight on Extending Fuel Tax Reduction (Comprehensive)

Concerns Over Prolonged Surge in International Oil Prices
Fuel Tax Cut Eased Ahead of April Deadline

On the 3rd, as international oil prices continue at their highest level in over seven years, a gas station in Seoul is selling gasoline at 2,095 won per liter, with domestic average gasoline prices expected to exceed 1,800 won per liter. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Yoo Hyun-seok] Gasoline prices have been on the rise for nearly a month since the beginning of the new year. Despite the reduction in fuel tax, concerns are emerging that prices in Seoul could exceed 1,800 won per liter.

According to Korea National Oil Corporation's Opinet on the 6th, the gasoline price in Seoul recorded 1,687 won per liter (ℓ) on the 9th of last month and continued to rise for 25 consecutive days, reaching 1,744 won as of the 3rd. The national average price on that day was 1,681.74 won per liter, up 1.48 won from the previous day. Seoul, the region with the highest price nationwide, saw an increase of 0.98 won during the same period, reaching 1,750.61 won.

The government is currently implementing a temporary 20% reduction in fuel tax on gasoline, diesel, and LPG butane. This is the largest reduction ever made in fuel tax history. Assuming the 20% fuel tax cut is fully reflected in consumer prices, gasoline prices would decrease by 164 won per liter. Diesel and LPG would see reductions of 116 won and 40 won per liter, respectively.

However, despite the government's fuel tax cut, petroleum prices are rising again. The representative fuel type, gasoline, consists of tax and pre-tax sales price. The pre-tax sales price fluctuates according to international oil prices. As international oil prices continue to rise, they offset the fuel tax reduction, inevitably causing petroleum prices to increase again.

Fuel prices are expected to continue rising for some time due to the upward trend in international oil prices. Recently, the escalating war crisis between Russia and Ukraine has pushed international oil prices to around $90 per barrel, the highest in seven years, which is driving up domestic gasoline prices. In particular, some experts predict prices will exceed $100 per barrel, raising concerns that gasoline price hikes will continue for the foreseeable future.

Generally, it is known that international oil prices take about 2 to 3 weeks to be reflected in domestic petroleum prices. If the upward trend in international oil prices continues, it will be reflected in domestic sales prices, potentially offsetting the effects of the fuel tax reduction.

Moreover, the government has limited options left to intervene. The fuel tax cut has already been implemented at the largest scale ever. Efforts to support budget gas stations and improve distribution structures to reduce petroleum distribution costs have also made significant progress.

The government is considering extending the fuel tax reduction, which is scheduled to end at the end of April. A refining industry official said, "If the fuel tax reduction ends as scheduled under the current circumstances, a sharp rise in gasoline prices is inevitable," adding, "This will lead to inflation and directly impact the economy of ordinary citizens."

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