Already 2,000 Won per Liter, When Reflecting the 'Kiwu Invasion'...(Comprehensive)

Breaking 2000 Won After 9 Years and 5 Months
Seoul Jung-gu Approaches 3000 Won

International Oil Prices Fell to $109
But May Keep Rising if War Prolongs

Fuel price information is displayed at a gas station in downtown Seoul. Photo by Mun Ho-nam munonam@

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

According to the Korea National Oil Corporation's oil price information site Opinet, as of noon on the 16th, the average gasoline price at gas stations nationwide was 2,004.51 KRW per liter, up 3.56 KRW from the same time the previous day. After surpassing 2,000 KRW per liter at 4 p.m. the previous day with a price of 2,000.95 KRW, the upward trend has been maintained. This is the first time the price has exceeded 2,000 KRW per liter since the fourth week of October 2012 (2,003.7 KRW), marking 9 years and 5 months.

The nationwide average price is highest in Jeju at 2,106 KRW. The highest price recorded nationwide is at the SK Energy Seonam Gas Station in Jung-gu, Seoul, at 2,959 KRW, approaching the 3,000 KRW mark.

The concern is that gasoline prices will continue to rise as the war drags on. 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 international oil price changes are typically reflected in domestic gasoline prices after 2 to 3 weeks, the recent decline in international oil prices has not yet been reflected domestically.

Experts advise considering policy support to increase the fuel tax reduction from 20% to 30%. Since only about 10% of gas stations are directly operated by refiners, it is difficult for refiners to control retail prices. Additionally, the sales structure includes fuel taxes (Transportation Energy Environment Tax, Driving Tax, Education Tax), value-added tax, crude oil import tariffs, petroleum import surcharges, and refiners' margins added on top of crude oil prices. Professor Kim Young-ik of Sogang University Graduate School of Economics said, "Although oil prices have started to decline, considering that the consumer price index typically lags oil prices by about two months and the possibility of prices rising again, it is necessary to consider a temporary adjustment to fuel tax reductions." 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 stagnation), increasing the burden on ordinary citizens."

Ukrainian soldiers inspect an apartment destroyed by indiscriminate shelling from Russian forces in the capital Kyiv on the 15th (local time). (Image source=AFP Yonhap News)

Refiners are contemplating whether to revise their existing plans to significantly increase plant operating rates this year. They had expected a recovery in demand for petroleum products after COVID-19, but the market variables have become too large due to major uncertainties. For example, the Singapore refining margin, a key profitability indicator, surged sharply from $5.7 per barrel in the previous week to $12.1 per barrel in the second week of March (March 7?11), showing significant volatility. The surge in refining margins is attributed to diesel prices rising as European demand, which imports 60% of its diesel from Russia, shifts to offshore markets such as Asia due to sanctions on Russia. Before the Ukraine crisis, diesel prices hovered around $110 per barrel last month but peaked at $180.97 on the 9th and then fell to $117.13 as of the 15th.

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