[Oil Refiners' Windfall Tax Also Under Scrutiny] ① The 'Exclusive Feast' Enjoyed Amid High Oil Prices... Donations Are Just for Show

High Oil Prices Leave Ordinary People Distressed, but Operating Profit Hits '14 Trillion'
Focus on Social Role... Calls for "Support for Vulnerable Groups"

[Asia Economy Reporters Oh Hyung-gil, Choi Seo-yoon] '36 billion KRW.' This is the donation amount recently announced by the four major oil refining companies to help energy-vulnerable groups struggling with heating costs. SK Energy donated 15 billion KRW to the Korea Energy Foundation. GS Caltex also contributed 10 billion KRW to the Korea Energy Foundation. Hyundai Oilbank and S-Oil each provided 10 billion KRW and 1 billion KRW, respectively.

Citizens are refueling their vehicles at a gas station in downtown Seoul. Photo by Moon Honam munonam@

'14.1762 trillion KRW.' This is the operating profit earned by the four major oil refining companies last year. They benefited from the surge in international oil prices following the Russia-Ukraine war. Based on these business results, employees of the oil companies are celebrating with bonuses exceeding 1000% of their base salary. This is a stark contrast to the lives of ordinary citizens shivering from heating bills that have jumped by tens of thousands of won.

Alongside banks profiting from high interest rates, the profits of oil refining companies during the high oil price period have come under scrutiny. The louder their 'exclusive celebrations,' the stronger the calls for social profit redistribution. There is growing support for the argument that some of the windfall profits enjoyed by the oil industry should be reclaimed or contributed to support vulnerable groups. Interest in corporate social responsibility is increasing, and there are calls to proactively view the social return of profits.

Oil Refiners Monopoly on High Oil Price Windfall

Amid high oil prices, the four major domestic oil refiners all posted record-breaking performances. This was thanks to rising oil prices, improved refining margins due to increased demand for petroleum products, and a significant increase in petroleum product exports.

SK Innovation recorded sales of 78.0569 trillion KRW and an operating profit of 3.9989 trillion KRW, its best performance since its founding. Sales increased by 66.6% and profits by a staggering 129.6% year-on-year. The main driver was the petroleum business. Last year, petroleum business sales rose 77.7% to 52.5817 trillion KRW. Operating profit grew 191.9% to 3.3911 trillion KRW compared to 2021 when it was in the trillion KRW range. Although the battery business posted nearly a trillion KRW loss, significant gains were made in lubricants and petroleum development businesses.

GS Caltex also posted sales of 58.5321 trillion KRW and operating profit of 3.9795 trillion KRW, increases of 69% and 97% respectively from the previous year, both record highs. S-Oil achieved sales of 42.446 trillion KRW and operating profit of 3.4081 trillion KRW, up 54.6% and 59.2% year-on-year. Hyundai Oilbank recorded an operating profit of 2.7898 trillion KRW, the highest growth rate among the four refiners at 144.2%, with sales increasing 69.6% to 34.955 trillion KRW.

However, from the second half of last year, oil refiners began to incur losses from the fourth quarter due to falling petroleum product prices caused by demand contraction amid an economic downturn.

Nonetheless, this year, oil prices are expected to remain strong due to the prolonged Russia-Ukraine conflict and demand recovery following China's reopening of economic activities. The International Energy Agency (IEA) forecasted in a report released last month that global oil demand will increase by an average of 2 million barrels per day compared to the previous year due to China's easing of COVID-19 restrictions and economic reopening, reaching a record high of approximately 101 million barrels per day. Oil refiners are expecting rosy results again this year.

On the 6th, vehicles lined up at the Mannam Square Rest Area budget gas station in Seocho-gu, Seoul, waiting to refuel. Although the fuel tax reduction rate was increased from 30% to 37% starting this month, the decrease in fuel prices has been minimal, so consumers do not feel the impact. According to Opinet, the oil price information site operated by the Korea National Oil Corporation, as of the afternoon of the 5th, the average nationwide gasoline price at gas stations was 2,117.18 KRW per liter, down 3.40 KRW from the previous day, and the diesel price was 2,150.78 KRW per liter, down 2.30 KRW from the previous day. Photo by Kim Hyun-min kimhyun81@

Ordinary Citizens Burdened While Bonuses Reach '1000%'

While most companies are cutting costs amid the economic downturn, the oil refining industry, which posted record profits, held a 'bonus feast.' Hyundai Oilbank gave all employees bonuses equivalent to 1000% of their monthly base salary in December last year, an increase from the 600% bonus in 2021.

GS Caltex paid bonuses amounting to 50% of the base annual salary. Based on GS Caltex's average individual salary in 2021 (105.52 million KRW), this translates to approximately 53 million KRW in bonuses.

SK Innovation and S-Oil have not yet finalized their bonus amounts. Last year, SK Innovation paid bonuses equal to 1000% of the base salary, and S-Oil paid the industry's highest bonus at 1600% of the base salary. The industry expects both companies to set even higher bonuses this year due to unprecedented record profits.

The oil refiners enjoying this super-boom are busy managing their public image. This is because political circles are continuously calling for windfall taxes on oil companies. However, the oil industry argues that simple comparisons with major European countries that impose windfall taxes are inappropriate.

An industry insider said, "Foreign windfall taxes are levied on companies engaged in upstream businesses that actually drill crude oil, whereas domestic refiners operate downstream businesses that purchase crude oil, refine it, and produce and sell products, so they are heavily affected by fluctuations in raw material prices such as crude oil."

In fact, the fourth-quarter results last year turned to losses. Critics argue that it is unfair to demand profits when companies made losses in the past without support but earned profits now.

However, calls for taxing companies that earn excessive profits during difficult economic times continue. While everyone suffers from rising oil prices, companies dealing with related products have made larger-than-usual profits. Kim Yoon-jung, co-executive director of the People's Solidarity for Participatory Democracy, said, "It is the role of the National Assembly and government to tax entities making huge profits and redistribute wealth," adding, "Discussions on increasing taxes on the wealthy through various means such as windfall taxes (earmarked taxes) or social solidarity taxes (progressive taxes) should be pursued."

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