Distribution Costs Boost Gas Prices

The distribution cost of gasoline at fuel stations nationwide reached 82 won per liter recently, the highest level since 1997.

The reason why gasoline prices have risen so sharply lately lies not only in the hike in international oil prices, but also in rising distribution costs.

While the distribution costs of gasoline and diesel oil rose in Seoul, Busan, Daejeon, and other metropolitan cities, it went down in Jeonam Province, Chungnam Province, Gyeongbuk Province, and other provinces.

The difference in gasoline pump prices between the most expensive and the cheapest is now about 460 won per liter. That is a 29,900 won difference when you fill up a medium-sized car that can hold 65 liters.

Dong-A Ilbo analyzed gasoline, diesel oil, and kerosene prices between 1997 and 2006 using the Computer-Assisted Reporting method and records supplied by the Korea National Oil Corporation.

Dong-A Ilbo also analyzed prices at 11,283 fuel stations nationwide in participation with “Oil Price Watch,” a supplier of information on oil product prices.

The results show that from January 1 to March 17, 2006 the national average gasoline price rose to 1467.6 won (2.7 percent) from last year’s average price 1429.6 won.

The consumer price of oil products is determined by the sum of the wholesale price, which fuel companies decide, and the margin and costs added by the distribution parties such as selling agencies, and the gas stations.

This year, selling agencies sold gasoline 7.8 won per liters cheaper than the officially fixed rate companies had posted. They still profited.

The fuel companies supplied gasoline to selling agencies at the rate that was lower than the officially fixed rate, to take care of the inventory. The selling price of the agencies ended up being lower than the officially fixed price.

This year, fuel stations posted a margin of 82.1 won to the gasoline that they bought at 1385.5 per liter from selling agencies. In 1997, the margin was only 56.2 won.

The distribution margin and costs of gasoline in Seoul was the highest in the nation at an average of 130.9 won. Jeju (110.2 won), Daejeon (97.3 won), Gyeonggi (91.9 won), and Ulsan (88.7 won) followed.

The distribution margin posted by fuel stations on diesel oil was 46.9 won per liter on average nationwide, scoring the highest since 2000.

The fuel station with the highest gasoline price was located in Jungnang-gu, Seoul with 1799 won per liter, while the station with the lowest fuel price was located in Yeongcheon City, Gyeongbuk Province with 1399 won per liter.

The rising fuel station rent cost drove up gasoline prices in Jungnang-gu, but there was less factors driving the prices up in Yeongcheon City.