Gasoline Followed by Diesel Prices Surpass 2,000 Won in Seoul... 'First Time in 14 Years'

Confusion Inevitable When Eigenvalues Reverse
International Oil Prices Rise Above $110 Per Barrel Again

[Image source=Yonhap News]

[Asia Economy Reporter Moon Chaeseok] Along with the soaring gasoline prices, diesel prices are also skyrocketing without end. Gas stations in the Seoul area have surpassed 2,000 KRW per liter on average for the first time in 13 years and 8 months. Due to the high international diesel prices caused by Russia's invasion of Ukraine and other factors, it is expected that the burden on everyday consumer prices will increase.

According to the Korea National Oil Corporation's oil price information site Opinet, as of 6:30 a.m. on the 23rd, the average diesel selling price at Seoul gas stations was recorded at 2,002.09 KRW per liter. This is an increase from 2,001.24 KRW per liter as of 3 p.m. the previous day, marking the first time since July 2008?13 years and 8 months ago?that the price exceeded 2,000 KRW, and it has risen further since then. Compared to the end of last month, it has risen by more than 400 KRW in about three weeks. It has surged to a level comparable to the average gasoline selling price in Seoul at the same time (2,078.41 KRW).

The diesel price surge is closely related to the Ukraine crisis. In Europe, where diesel vehicles are common, supply and demand issues have worsened since the Ukraine crisis, influencing the rapid price increase. According to major foreign media, Russia accounted for about 20% of the European Union's (EU) diesel imports as of 2019. Due to supply shortages, international diesel for automobiles closed at $144.76 per barrel on the Singapore market on the 21st. International diesel prices soared to $180.97 on the 9th. Before Russia invaded Ukraine, prices were in the $110 range.

There are also criticisms that the government's 20% fuel tax reduction policy, implemented since November 12 last year and focused mainly on gasoline, has relatively lessened the price drop effect on diesel. Since the gasoline tax discount is larger than that for diesel, the price reduction effect is more pronounced for gasoline, which has diminished the effect of curbing the diesel price surge. After the government's 20% fuel tax cut, gasoline prices dropped by 164 KRW per liter, while diesel prices fell by 116 KRW per liter. The diesel price reduction was about 50 KRW less than that of gasoline.

As the situation unfolds, objections have been raised against the government's consideration of a scenario to expand the fuel tax cut to 30%. There are concerns that if diesel prices surpass gasoline prices, greater confusion could occur. During the 2008 oil shock, such a phenomenon happened, leading some drivers to illegally use kerosene instead of diesel, causing controversy. Kerosene prices for boilers also rose accordingly.

Diesel vehicle drivers in the transportation and freight industries, who are directly feeling the impact of the diesel price surge, have held protests urging the government to come up with countermeasures. They expressed that following last year's China-origin urea solution crisis, diesel prices have skyrocketed since the beginning of the year, causing a heavy burden. Earlier, on the 21st, the Cargo Solidarity Headquarters of the Korean Confederation of Trade Unions (KCTU) Public Transport Workers' Union held a press conference in front of the Government Seoul Office, stating, "More than 30% of transportation fees go to fuel costs, threatening the livelihoods of freight workers," and condemned, "If measures to cover losses are not immediately implemented, the damage could escalate unpredictably."

Meanwhile, international oil prices, which had temporarily shown a downward trend, have surged again, surpassing $110 per barrel. On the 21st (local time), April West Texas Intermediate (WTI) crude oil closed at $112.12 per barrel on the New York Mercantile Exchange, up 7.1% ($7.42) from the previous session. This is the highest level in two weeks. The surge is attributed to the EU's consideration of banning Russian oil imports and attacks on Saudi Arabian oil facilities by Yemeni rebels.

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