Breaking 1,950 KRW per liter for kerosene 'All-time High'... Approaching 2,000 KRW Range (Comprehensive)

Fuel Tax Cut Insufficient for Cards

Refiners Say "Supply Management Is Urgent"

An information notice related to the expansion of the fuel tax reduction rate from 20% to 30% was posted at a directly operated gas station in Seoul on the 1st. Photo by Moon Honam munonam@

[Asia Economy Reporter Moon Chaeseok] Diesel prices have soared to an all-time high due to supply reductions caused by the prolonged Russian invasion of Ukraine. Truck drivers and other diesel vehicle operators have suffered another major blow to their livelihoods following last year's China-originated 'urea solution crisis.' There are also forecasts that diesel prices will continue to rise in the second half of the year due to increased demand from the COVID-19 recovery.

According to Korea National Oil Corporation's Opinet on the 12th, as of noon, the average diesel price at gas stations nationwide reached 1,952.22 KRW per liter, setting a new record. The previous high was 1,947.75 KRW per liter on July 16, 2008. The average gasoline price nationwide was 1,948.29 KRW. Following the previous day's 4 p.m. report where diesel prices at 1,947.6 KRW per liter surpassed gasoline prices of 1,946.1 KRW for the first time in 14 years since June 2008, this trend has continued.

This is analyzed to have occurred due to high demand coupled with reduced supply caused by Russia's invasion of Ukraine. In particular, Europe depends on Russia for about 60% of its diesel imports. As Russian supply decreases, prices inevitably skyrocket. With the war likely to be prolonged and diesel demand expected to increase after the COVID-19 endemic phase, prices may rise further. Under the 'supply reduction and demand increase' trend, prices can only go up. According to foreign media, Russia is likely to engage in a prolonged war to control the Black Sea's ice-free ports.

Diesel vehicle workers such as truck drivers, bus drivers, excavator operators, and ready-mix concrete truck drivers have been hit directly.

The problem is that it is expected to be difficult to curb the rising diesel prices. Despite the government's representative measure of expanding the fuel tax cut by 30%, diesel prices have not been easily controlled. Including value-added tax, the fuel tax per liter is about 820 KRW for gasoline and 581 KRW for diesel, but with the government increasing the fuel tax cut to 30%, it has been reduced to about 573 KRW for gasoline and 407 KRW for diesel.

The refining industry expects diesel prices to continue rising in the second half of the year. They foresee that sanctions against Russia will likely continue even after the war prolongs. An industry official said, "Since refiners have limited authority over price setting, it is more important at this point to manage supply disruptions rather than initiate price cuts."

It is somewhat reassuring that domestic refiners' production capacity supports supply, so although prices may be high, supply itself is not a problem. It is also explained that Korean diesel prices are not expensive on a global scale. According to the Korea Petroleum Association, as of the fourth week of last month, Korea's diesel price was 1,907 KRW per liter, about 26.7% lower than the OECD average of 2,416 KRW. Based on gas stations, it is about 79% of the OECD level.

An industry official said, "In some parts of Europe such as Poland, diesel is unavailable at gas stations and gasoline is limited to 20 liters per person, but Korea is not expected to face such supply shortages. Also, Korean diesel prices are still about 26% cheaper than the OECD average, which exceeds 2,000 KRW per liter, so it is necessary to monitor price trends a bit more closely."

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