"Even 10 Won More Than Next Door and Customers Vanish" Budget Stations Can't Survive, Gas Stations Devastated [Paradox of the Price Cap] ①

A self-employed gas station owner surnamed Kim, operating in Yongin, Gyeonggi Province, said on the 14th, “If the price is just 10 won higher than at other gas stations, customers immediately disappear and daily sales have dropped to less than half,” adding, “I feel like it would be better to just shut down.”

Nonghyup Affordable Gas Station located in Yongin, Gyeonggi Province. The place looks quiet with few customers. Photo by Seo Mideum

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Kim added, “Others nearby are also closing down one by one, so it doesn’t feel like someone else’s problem. Since I can’t raise the selling price while card processing fees and labor costs continue to drain money, the more I run the business, the more I lose.”

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The growing outcry on the ground is attributed to the structural limitations of the petroleum price ceiling system, which is unable to fully reflect market trends. In particular, the third price freeze has widened the gap between the ceiling and the market price. While these unavoidable measures were implemented to stabilize prices, the prolonged enforcement is accumulating a growing disparity between prices and costs. Gas stations are forced to keep their retail prices artificially low under government scrutiny, enduring losses in silence.

Although the situation differs by type of gas station, company-operated, privately-operated, and budget gas stations alike are all experiencing increasing pressure on profitability. Company-operated stations, run directly by oil refiners, can keep prices relatively low but must bear the resulting losses. Privately-operated stations, managed by individual business owners, see customers leave directly when they lose the price advantage. Budget gas stations, which had been able to offer low prices through government support, have seen their past competitiveness erode as the price gap with regular stations has narrowed since the introduction of the price ceiling.

At around 11 a.m. on the 13th, the gas station in Seongdong-gu, Seoul, known for being cheaper than budget gas stations, saw a continuous line of vehicles. Photo by Bokyung Jang

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Lee, who operates a company-run gas station in Seongdong-gu, Seoul, said, “There was a constant stream of customers from early morning,” adding, “On days when traffic is heavy, the road and sidewalks can get congested, creating dangerous situations.” However, increased customer inflow does not improve profitability. Because prices are kept low, the more volume is sold, the greater the loss. An industry insider commented, “Company-operated stations seem to be under the most government pressure.”

Budget gas stations, which used to be the main source of low-priced fuel, are also being directly impacted. They had maintained low prices through government support, but now their price advantage has weakened as the difference with regular stations has narrowed. Operators of budget gas stations unanimously said that, compared to February, they have seen a general decrease in customers and a drop in sales.

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Kim, who manages a budget gas station in Gwangjin-gu, Seoul, said, “Even regulars and truck drivers don’t come as often these days, and sales volume has noticeably declined. Some customers come expecting lower prices at a budget station, but complain that it’s more expensive than company-operated stations.” He added, “Stations operating under lease arrangements face higher fixed costs, so surrounding stations are struggling even more. I am concerned that even more stations will close down in the second half of this year.”

As a result, some stations are even considering raising their prices, exposing the limits of the policy’s effectiveness. On this day, the average gasoline price in Seoul was tallied at 2,027 won, while in Gyeonggi Province it was 2,001 won. A representative from the Korea Oil Distribution Association stated, “Actual operating profit margins are less than 1 percent,” adding, “There is a serious lack of adequate measures for gas stations.”

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