Domestic Oil Prices Reach a Record High

With the continuous increase of global oil prices, domestic oil prices have reached a record high.

As a result, the government is expected to discuss its comprehensive countermeasures against oil prices, including the reduction of a levy on oil imports, in a cabinet meeting on Tuesday.

According to the Korea National Oil Corporation on Sunday, a recent sample nationwide survey of 556 gas stations showed that the average price for unleaded regular gas last week was 1,362.70 won, up 5.59 won per liter compared to the first week in May. This number surpasses the record number set in the 4th week of April, 1,357.99 won, just two weeks ago.

By regions, the price in Seoul is 1,414.24 won (up 10.36 won), the price in Busan is 1,361.12 won (up 5.48 won), and the price in Daegu is 1,338.38 won (up 2.14 won).

Due to soaring oil prices, there is a growing possibility that electric charges and gas rates are likely to increase in the second half of this year.

According to the Korea Electric Power Corporation, when oil prices go up by one dollar per barrel with other factors like exchange rates remaining the same, increasing electric charges by 0.4 to 0.5 percent will follow. The Korea District Heating Corporation is reviewing measures to reflect oil prices increases in coordinating its heating rates in August.

Regarding this issue, the government is planning to discuss government countermeasures and announce them in a cabinet meeting on Tuesday. The countermeasures include the reduction of a levy on oil imports and transportation taxes, a voluntary campaign towards economy in consumption, tax breaks of up to seven percent for companies using high-efficient construction tools and materials, and the expansion of government support for developing oil fields overseas.

Goh Jung-sik, a government official in charge of deliberating the energy industry at the Ministry of Commerce, Industry and Energy, said that tax cut was not in the works yet because the final exchange and coordination between each ministry was not completed , and it was not taking into consideration compulsory measures, such as requiring personal drivers not to drive one day in ten days, because the oil supply has not been so problematic until now.

Meanwhile on Friday, oil prices of Dubai Oil from the Middle East ended at $35.83, up $0.63 compared to the previous day. This beat the highest number in 14 years set in the previous day.

Prices for WTI surpassed its highest number with $41.32 as well, and prices for Brent Oil from North Sea surmounted the $39 range, coming in at $39.08.

Ki-Jeong Ko koh@donga.com