Despite No Impact from Kyiv Invasion... Nationwide Gasoline Prices Surpass 2,000 Won 'For the First Time in 9 Years and 5 Months'

Won-yu price lags behind Dubai oil decline not yet reflected
Long-term battle unlikely to be ruled out... "Request to expand fuel tax cut by 30%"

Citizens waiting at the Giheung Rest Area on the Gyeongbu Expressway heading toward Busan in Yongin-si, Gyeonggi-do, where gas prices were in the 1900 won range on the 14th, amid nationwide gasoline prices soaring into the 2000 won range. (Image source=Yonhap News)

[Asia Economy Reporter Moon Chaeseok] Due to the impact of Russia's invasion of Ukraine, the average gasoline retail price at gas stations nationwide has exceeded 2,000 KRW per liter for the first time in 9 years and 5 months. Although international oil prices have recently turned downward, domestic gasoline prices tend to lag behind international oil price trends, and since most gas stations are independently operated, it is difficult for refiners to control nationwide gas station prices. Considering these realities, concerns are rising that the upward trend in gasoline prices is likely to continue as the war prolongs.

According to the Korea National Oil Corporation's price information site OPINET on the 16th, as of 4 p.m. the previous day, the average gasoline price at gas stations nationwide rose by 12.91 KRW from the previous day to 2,000.95 KRW per liter, surpassing the 2,000 KRW mark for the first time in 9 years and 5 months since the fourth week of October 2012 when it was 2,003.7 KRW. As of 9 a.m. on the same day, the price was 2,003.67 KRW, up 2.72 KRW from the same time the previous day. The average price nationwide is highest in Jeju at 2,106 KRW. At the SK Energy Seonam Gas Station in Jung-gu, Seoul, which recorded the highest price nationwide, the price is 2,959 KRW, approaching the 3,000 KRW mark.

The problem is that there are concerns that gasoline prices will continue to rise as the war prolongs. The price of Dubai crude oil, which serves as the benchmark for domestic gasoline prices, rose to $127.8 per barrel on the 9th but fell to $110.5 on the 11th and $109.9 on the 14th. Considering that it usually takes 2 to 3 weeks for this to be reflected in domestic gasoline prices, it is interpreted that the recent decline in international oil prices has not yet been reflected.

Experts advise that policy support to increase the fuel tax reduction from 20% to 30% should be considered. Since directly operated gas stations account for only about 10% of the total, refiners find it difficult to control gas station prices, and the sales structure, which adds fuel taxes (Transportation Energy Environment Tax, Driving Tax, Education Tax), value-added tax, crude oil import tariffs, petroleum import surcharges, and refiners' margins to the crude oil price, cannot be ignored.

Professor Kim Young-ik of Sogang University Graduate School of Economics said, "Although oil prices have turned downward, considering that the consumer price index tends to lag oil prices by about two months and the possibility of prices rising again in the future, it is necessary to consider a temporary adjustment of the fuel tax reduction." He added, "If oil prices rise, not only will inflation increase, but real income will decrease and consumption will contract, which could lead to a vicious cycle of stagflation (rapid inflation during economic recession), increasing the burden on ordinary citizens."

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