Measures to help people with rising diesel prices need to be hurried

As the price of diesel surges, those who work in transportation, such as freight and delivery, are struggling. The average diesel price across South Korea went up more than 30 percent compared to the beginning of this year. In Seoul, it exceeded 2,000 won per liter last week. At some gas stations, diesel price are higher than gasoline due to the sharpest rise in 14 years.

Soaring diesel prices are concerning as it can burden the lives of ordinary people, including small business owners, as well as overall industries due to issues in logistics. The reason behind such a surge is a problem with Russian diesel supply, which accounted for more than half of South Korea’s import amount, due to the situation in Ukraine. As industrial activities slowed down due to COVId-19, Europe reduced diesel production last year and is left with little inventory. If the situation in Ukraine prolongs, diesel prices will continue to last for a while.

The direct damage is concentrated on ordinary people, such as freight vehicle drivers, small business owners, and farmers and fishermen, who use diesel for livelihood. According to the freight industry, oil expenses increased up to 2.5 million won on average per month depending on freight volume. While oil expenses account for more than 30 percent of average freight charge, they are pushed to a situation where they can neither stop working nor continue. Oil tax reduction, which has been extended until July, is not much helpful as it is linked with fuel subsidies received by freight drivers, which means their subsidies also decreased.

The industry is asking for the restoration of subsidies pegged to fuel taxes that were discontinued in 2009, but the government is in a quandary as it is against the decarbonization initiative and has fairness issues. However, it is not a time for the government to sit behind. An option to consider is to further reduce oil tax but the offset effect of fuel subsidy reduction should be taken into account. Measures to temporarily provide practical benefits for use by ordinary people should be put forward. In addition, the oil tax system should be revised by assessing the impact of diesel prices on overall industrial competitiveness.