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`Budget gas stations` and market economy

Posted February. 14, 2015 08:49,   


The most expensive gas station in Korea is located in front of the National Assembly in Yeouido, Seoul. The station doesn’t have to enter fierce price competition with others since its main customers are lawmakers who receive monthly financial support for their gas bill by taxpayers’ money. Instead of cheaper gas, the station is quite generous with free bottled water for chauffeurs behind the wheel. The station is said to have lowered the price a little due to public criticism that those members of National Assembly are squandering the national coffer. However, general citizens without financial support from tax money still choose the longer path for a gas station that provides gas at a lower price of even 100 Korean won (approx. 10 U.S. cents) per liter.

For a while, “budget gas stations,” which could enjoy subsidies and tax benefits from the government was gaining popularity as they provided gas at a little cheaper price than other stores in the neighborhood. In 2011 when former President Lee Myung-bak said, “The gas prices are strange,” the government came forward to stabilize the gas price by opening the very first budget station, whose number has now reached 1,134 nationwide. With declining oil prices and stiff market competition, however, there are more budget stations that permanently shut down the door than the ones that newly start the business. In Korea, there are some 12,400 service stations nationwide and some point out that the number is too high compared to the size of nation’s economy. The UK whose gas consumption is similar with Korea has a total of 8,000 filling stations.

“Korea National Oil Corporation’s business of budget station is unfair commercial activity by exercising its privilege as a state-run company,” argued the Korea Oil Station Association who sued the oil corporation to the Fair Trade Commission. The corporation calls for multiple tenders to make a large purchase of oil with cheaper prices and provides it to budget stations with little profit margin. The association contends that it is an unfair commercial trade for the state-owned corporation to give such privilege to a selective few. The Budget Gas Station Association, on the other hand, disputes that it is other general service stations that receive all the privilege from Korean conglomerates.

In fact, the business of budget gas station is unusual given that the government itself is involved in the market economy to make competition with private companies. In the beginning, the government vowed to pass the business over to the private sector when its business competitiveness is established, which seems highly unlikely for the present. It makes sense when some say that the business of budget stations goes against the market policy. It is also true that there are a lot of consumers who purposely fill up the gas tank at highway service areas because of low price. It seems that the Park Geun-hye administration is in an awkward situation whose side it should take with.