High Korean Gasoline Prices Make Global Top Five List

As gasoline prices pass the 1,600 won per liter mark, many people are feeling the burden. Motorists are trying to save as much gas as they can by filling up their cars personally or by comparing gasoline prices on Internet websites.

But the government, which collects 62 percent of consumer gasoline prices as tax revenue, is refusing to lower the tax rate, saying, “If we lower the oil tax, consumption will grow and act as a burden on the national economy.”

How do domestic Korean gasoline prices rank internationally? The following is a comparison among member states of the Organization for Economic Cooperation and Development (OECD).

Korea ranks close to the top in gasoline prices, when taking national income into account -

Energy Detente, an American journal specializing in petroleum price surveys, recently announced consumer gasoline prices and the percentage of taxes of the prices for 21 of the current 30 OECD nations, by June 2005 standards.

At the end of June, the country with the most expensive gasoline prices was Britain at 1,549 won per liter. Taxation accounted for 71 percent of the price, or 1,100 won. Germany, France, Sweden, Denmark, Italy and other advanced European nations also charged approximately 1,400 won per liter, with taxes at 60 percent or higher.

Korea’s average price for June was 1,402 won, ranking eighth out of the 21 countries surveyed. In terms of tax percentage, it ranked tenth at 62.1 percent.

A Korean National Oil Corporation (KNOC) spokesperson explained, “Advanced nations have higher consumer prices and taxation percentages on gasoline because they are mainly oil importers and try to induce energy conservation through high taxes.”

As the status of the economy is different for each country, however, comparative values rather than absolute standards should be applied.

If per capita national income is taken into consideration in comparing the 21 nations, Korea ranks among the top five.

With consumer prices divided by per capita national income and setting the figure for Korea as 100, gasoline prices abroad scored only 31 for Japan, 14 for the United States, and 46 for Britain and France.

The only nations with higher gasoline prices in comparison with per capita income are the four Eastern European countries of Poland, the Czech Republic, Hungary and Slovakia. These countries maintain high oil prices on purpose because they fear excessive dollar drainage could result from increased petroleum consumption, as their export industries are not stable.

The need to lower taxes versus losses over the long term -

In order to mitigate the burden on its people, the French government recently instructed refined oil corporations to make price cuts, declaring that if the corporations do not obey, they will be hit with a special tax that will return the profits to the citizens. In the United States, as gasoline prices skyrocketed due to soaring oil prices and Hurricane Katrina, the state of Georgia decided to put a temporary hold on gasoline taxes.

The Korean government raised 21.4571 trillion won in oil taxes last year, which accounts for 18.2 percent of its total revenues.

Public opinion that “taxes on gasoline should be cut” is gathering force. The opposition Grand National Party is promoting a 10 percent reduction in oil taxes, but the administration is not bowing to the pressure. First Vice Minister Bahk Byong-won of the Ministry of Finance and Economy argued, “Reducing gasoline prices at the expense of taxes is not desirable.”

Sang-Soo Kim ssoo@donga.com