Fuel Cost Burden 'Increasing Steeply'... Gasoline and Diesel Both Surpass 2,000 Won for the First Time

Gasoline 2001.01 KRW, Diesel 2003.56 KRW

Simultaneous Increase Likely to Continue for a While

Fuel Tax Cuts 'Ineffective'

Livelihood Drivers' Worries Deepen

On the 25th, fuel price information is displayed at a gas station in downtown Seoul. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Moon Chaeseok] For the first time, both gasoline and diesel prices have surpassed 2,000 KRW per liter. Despite the government's indication of expanding fuel tax cuts and diesel vehicle subsidies, domestic oil prices have surged regardless of fuel type, and it is expected that low-income drivers and the industrial sector will suffer widespread impacts.

According to the Korea National Oil Corporation's oil price information service, Opinet, as of noon on the 26th, the average diesel price at gas stations nationwide was 2,003.56 KRW, up 0.88 KRW from the previous day. The average gasoline price rose 2.42 KRW to 2,001.01 KRW.

The government's last resort, the "expansion of fuel tax cut rates," appears to have no effect at all. Although the reduction rate was increased from 20% to 30% starting from the 1st of this month, the impact has been minimal. The 30% rate is the legal maximum.

In particular, diesel prices have been higher than gasoline prices since the 11th (1,947.59 KRW), maintaining this reversal for over two weeks. This also broke the previous record of 1,947.75 KRW set in July 2008. Gasoline is no different. After surpassing 2,000 KRW for the first time in 9 years and 5 months on March 3rd, it dropped to 1,932 KRW on the 6th before rebounding.

The decisive reason for the rising oil prices is Russia's invasion of Ukraine. A global shortage of diesel inventory, centered in Europe, has significantly reduced diesel supply. Additionally, Western countries' import bans on Russian petroleum products have increased supply instability. For these reasons, the simultaneous rise in diesel and gasoline prices is expected to continue for the time being.

As oil prices surge, the worries of livelihood drivers deepen. Especially self-employed individuals operating commercial diesel vehicles such as trucks and taxis are facing direct impacts. Although the government expanded the criteria for fuel-linked subsidies starting next month as a "diesel price increase tailored measure," complaints from self-employed drivers indicate that the policy's effect is limited due to the sharp rise in diesel prices.

Due to the high oil prices, consumption of gasoline and diesel is also analyzed to be decreasing this year. According to the Korea National Oil Corporation's Petronet, domestic gasoline and diesel combined consumption in April was 17.355 million barrels, down 5.8% compared to March. This is also 18.3% less than the consumption in April last year (21.247 million barrels), when social distancing was implemented due to the spread of COVID-19. Domestic oil consumption has shown a steady decline this year as well: 21.996 million barrels in January, 18.492 million barrels in February, and 18.424 million barrels in March.

If domestic fuel consumption decreases, inventory will accumulate, and even if international oil prices reverse and fall, domestic fuel prices may not drop noticeably for consumers until the existing inventory, priced at the previous higher rates, is depleted over a considerable period.

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