[Column] Controversial and Problematic Fuel Tax Reduction

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] "They said they would lower the fuel tax, so why are gas station prices staying the same?" "They say gas prices have dropped, but I don't feel it at all."

Although the government expanded the fuel tax reduction from 20% to 30% starting this month, consumers are voicing complaints online that they do not feel the difference.

According to the government's plan, prices should have dropped by 83 won per liter for gasoline, 58 won for diesel, and 21 won for liquefied petroleum gas (LPG) butane, yet local gas station price boards have not budged, causing dissatisfaction.

The refining companies, identified as the "culprits," express their frustration. They say they have lowered the selling prices at company-operated gas stations and supply prices to gas stations despite incurring losses worth hundreds of billions of won, but there is no effective way to speed up the impact of the fuel price reduction. The unprecedented strong refining margins and excellent performance have instead fueled criticism.

Independent gas stations argue that they cannot sell fuel bought at higher prices before the tax cut at lower prices now.

This repetitive and futile debate, which also occurred during the fuel tax cuts in 2018 and last November, is happening again like d?j? vu. Ultimately, the government has shifted responsibility to the refining industry and gas stations by threatening to conduct on-site inspections and crack down on collusion.

Since the tax was lowered to ease the public burden caused by high oil prices, anyone secretly profiting through unfair practices should be punished. Accurate market investigations and fair penalties must be implemented to eliminate the mindset of "let's make a quick buck."

However, more fundamentally, there needs to be a focus on strategies for managing fuel prices.

International oil prices have not fallen below $100 per barrel (WTI basis) since the Russia-Ukraine war. With expectations that demand for petroleum products will increase due to economic recovery after the COVID-19 endemic, if geopolitical crises recur, a sharp rise in oil prices is inevitable.

As a country that produces no oil, we cannot ignore warnings from expert institutions that international oil prices could exceed $200 per barrel this year. Although the government has temporarily lowered the fuel tax to the legal maximum to put out the urgent fire, it cannot rely on temporary measures indefinitely. The time has come to find new alternatives for energy taxation.

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