Average Price of Gasoline Reached 1420 won per Liter

As the international price for oil reaches its highest peak in fourteen years, domestic consumer prices of oil goods are jumping as well. The government is planning to resolve the rising oil prices with actions such as tax cuts, but it is not certain how effective such actions would be because there are restrictions on tax cuts when international oil prices keep rising.

According to the oil refining industry on May 7, SK Corporation, LG-Caltex Oil, and Hyundai Oilbank all raised their prices from five to eleven won per liter.

SK Corporation raised its ex-factory price of gasoline and light oil from 1295 won to 1300 won, and 837 won to 846 won, per liter, respectively, and raised the cost of indoor lamp oil and boiler oil by five won.

LG-Caltex Oil raised its prices 11 won for gasoline, nine won for indoor lamp oil and boiler oil, and eight won for light oil. Hyundai Oilbank Company also raised its prices for gasoline, indoor lamp oil, and boiler oil by five won, and for light oil, ten won.

Accordingly, the average price of gasoline in Seoul is expected to jump to at least 1420 won per liter.

Oil refining corporations, which raised their prices four to eight won per liter on April 29, cut back costs by twelve won the next day following the government’s tariff cut, but then raised prices again afterwards.

Meanwhile, Dubai crude oil jumped $1.02 to rest at $34.53 on May 6. It was the first time for Dubai crude oil to exceed $34 since October 16, 1990.

Thus, the government is considering measures of cutting down transportation taxes to stabilize oil prices.

A source from the Ministry of Finance and Economy said, “We are considering cutting down transportation taxes imposed on gasoline in order to counteract the high oil prices,” adding that this would be carried out only after discussion with related ministries.

In addition, the government is pushing ahead for the cost cut of four to six won per liter on the levy for oil imports. If both the transportation tax and the levy for oil imports are cut down, the consumer prices for gasoline would drop seventy to eighty won per liter.

However, the drop of oil prices is not expected to be substantial for consumers because the oil refining corporations have already raised the prices. It is anticipated that the government’s countermeasure for oil price stabilization will be confirmed sometime next week.

Do-Young Kim Ki-Jeong Ko nirvana1@donga.com koh@donga.com