Measure seeks price transparency; P.M. says will consider cutting tax
The government on Wednesday said it will launch an online market for oil products and boost competition among suppliers in a package of measures to lower fuel prices.
The proposal submitted by a pan-governmental task force also said that the government will consider cutting fuel taxes in the long-term if price hikes continue to weigh on the economy and consumers.
Trade of fuel products may start in the online marketplace at the year-end and on a futures market next year to ensure price transparency, officials said.
“Competition is not working in this sector because there is no market reflecting the demand and supply situation swiftly for oil products,” Finance Minister Yoon Jeung-hyun said during a weekly policy meeting.
Seoul will continue to put pressure on refiners to show “social responsibility,” the statement said.
A taskforce of government officials and civilian experts found that oil refiners have engaged in asymmetric price setting which contributed in part to price increases. The probe confirmed earlier in the morning that refiners moved quickly to raise gasoline and other fuel prices as soon as international prices went up while they were slow to reflect international price movements when crude prices fell abroad.
The announcements reflected Seoul’s decision to focus on price transparency and competition rather than on oil tax cuts. Authorities have been arguing that price cuts at oil refiners are essential to tame inflation in the Asia’s fourth-largest economy.
Yoon in February downplayed the idea of an oil tax cut although it accounts for nearly half of the consumer price as it still remains low compared to the country’s peers in the Organization for Economic Cooperation and Development.
The government raised 1 trillion won ($922 million) of incremental tax in the past three months, compared with the same time last year. The Korea Customs Service confirmed Wednesday that the country imported a total of 25.6 trillion won of crude oil in the first quarter, up almost 40 percent in value from a year ago.
Economy Minister Choi Joong-Kyung especially remained vocal about price cuts at refiners, saying that they have been providing inadequate information on the import cost.
Three major oil refiners said they will lower prices this week, an act of surrendering to government pressure.
SK Energy, the country’s largest refiner, on Sunday cut prices of gasoline and diesel by 100 won per liter for the next three months to join Seoul’s inflation fight. The industry’s No. 3 S-Oil and its smaller rival Hyundai Oilbank announced the same, on Tuesday and Wednesday respectively.
The country’s Consumer Price Index hit a 29-month high in March, rising to 4.7 percent from a year earlier. It exceeded the Lee Myung-bak administration’s target band of 2 to 4 percent for the seventh consecutive month.
Prime Minister Kim Hwang-sik, later in the afternoon hinted of a possible oil tax cut.
“We will consider cutting oil taxes after a comprehensive study on the reduction’s impact to tax revenues and energy strategies,” Kim said during a government interpellation session at the National Assembly.
International crude prices are around two-and-a-half year highs. Korea’s average prices of gasoline remained relatively high compared with those of other nations, at around 1,971 won and 1,800 won, respectively, as of this week.
By Cynthia J. Kim (email@example.com