[Fuel Price Fact Check] Despite Fuel Tax Cut, Gasoline Peak Price Remains '2992 Won'

Government's Fuel Tax Reduction Measures Amid High Oil Prices Since November Last Year
20% Reduction (Nov Last Year) → 30% Expansion (May) → 37% (Legal Maximum Limit, July)

Diesel and Gasoline Prices Still Hover Above 2100 Won at Distribution Points Like Gas Stations

National Assembly Proposes Bills to Increase Fuel Tax Reduction to Over 50%
"Additional Fuel Tax Reduction Effects Limited"... Positive Impact from Declining International Oil Prices

The surge in fuel prices has stopped after 9 weeks as the fuel tax cut was expanded to 37%. According to Opinet, the oil price information service of the Korea National Oil Corporation, the average retail price of gasoline at gas stations nationwide in the first week of July was 2,116.8 KRW per liter, down 20.9 KRW from the previous week. On the 10th, a gas station in Seoul was selling gasoline at 2,079 KRW and diesel at 2,109 KRW per liter. Photo by Moon Honam munonam@

It has become difficult to turn the steering wheel toward gas stations without hesitation. The highest price remains at 2,992 won, with an average of 2,114 won. Gasoline and diesel, which used to be the lifeline for ordinary people, have become products that make consumers consider their budgets first. The government has not remained idle either. Since last year, it has implemented three rounds of fuel tax cuts, expanding the reduction to the legal maximum limit, but experts point out that high fuel prices can only stabilize if international oil prices fall.

According to the government and industry on the 14th, the government began reducing fuel tax by 20% from November last year when international oil prices were rising, expanded the reduction to 30% in May this year, and from the 1st of this month, increased the reduction to the legal maximum of 37%.

Current law allows the flexible tax rate on gasoline and diesel to be adjusted by presidential decree within a 30% range. Legally, before the 20% fuel tax cut in November last year, the combined fuel tax and value-added tax (VAT) imposed on gasoline was 820 won per liter. A 30% reduction (to 573 won) was applied, but the reduction implemented this month lowers the transportation tax?the largest component of the fuel tax?by 30%, resulting in an overall 37% reduction in the fuel tax. The fuel tax consists of the transportation tax, education tax (15% of the transportation tax), and driving tax (26% of the transportation tax), plus an additional 10% VAT. According to this formula, the total fuel tax and VAT applied per liter of gasoline decreased from 820 won (before the fuel tax cut) → 656 won (November last year, 20% cut) → 574 won (May this year, 30% cut) → 517 won (July this year, 37% cut).

From the government's perspective, this can be seen as an extraordinary measure to stabilize inflation and the economy of ordinary citizens. However, the retail price of gasoline and diesel at gas stations still hovers above 2,100 won per liter. In response, the National Assembly has been proposing amendments to expand the legal fuel tax reduction limit to over 50%.

On the 22nd of last month, Representative Bae Jun-young of the People Power Party proposed an amendment to the Transportation, Energy, and Environment Tax Act that would allow the flexible tax rate on fuel to be adjusted up to 50%. Representative Kim Min-seok of the Democratic Party also proposed an amendment to increase the fuel tax reduction up to 70%. Meanwhile, there are even calls for recovering excess profits from oil refiners. However, since domestic refiners import 100% of crude oil and refine it for supply, many argue that it is difficult to apply overseas cases where crude oil is sold directly. Additionally, since fuel tax is already paid, introducing a windfall tax would be considered double taxation.

Although the National Assembly is competing to propose reducing taxes or recovering oil refiners' profits through taxation, there are criticisms that such measures have little effect on actually lowering fuel prices. This is because there is no way to control international oil prices, which make up the majority of the distributed fuel price. International oil prices have already risen significantly, so the scope for lowering prices through fuel tax cuts is limited. Some also point out that the tax cuts are actually supporting demand.

Ultimately, international oil prices need to fall, and the positive sign is that international gasoline and diesel prices have recently dropped sharply amid growing concerns about a global economic recession. Gasoline prices fell from $145.2 per barrel in the last week of June to $127.0 per barrel in the first week of July, a decrease of $18.2 (12.5%) in just one week. This is the largest weekly fluctuation in international gasoline prices this year.

Diesel prices also dropped from $171.1 to $152.8 during the same period, a decrease of $18.3 in one week. Domestic gasoline and diesel prices follow international prices, and refiners appear to be gradually lowering domestic supply prices to reflect the sharp decline in international petroleum product prices last week.

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