Will the Yoon Administration Increase the Fuel Tax Cut? A 30% Reduction Lowers 1ℓ by 246 Won

Increased Volatility in International Oil Prices After Russia's Invasion of Ukraine
Urgent Need for Solutions to Soaring Fuel Costs

On the 4th, fuel price information is displayed at a gas station in downtown Seoul as oil prices rise due to Russia's invasion of Ukraine and other factors. Photo by Moon Honam munonam@

[Asia Economy Reporter Oh Hyung-gil] As international oil prices soar, domestic gasoline prices are expected to surpass 2,000 won soon, intensifying calls to expand the fuel tax reduction.

All eyes are on President-elect Yoon Seok-yeol. The key question is whether the new government will present bold solutions before its inauguration to stabilize the cost of living and prices for ordinary citizens.

The average gasoline price in the Seoul area has exceeded 2,000 won.

According to the Korea National Oil Corporation's oil price information site Opinet, as of the 11th, the average gasoline price in Seoul rose by 24.93 won from the previous day to 2,011.15 won per liter.

This is the first time in about 8 years and 6 months since the second week of September 2013 (2,006.7 won) that the average gasoline price in Seoul has surpassed 2,000 won.

The national average price also rose by 19.65 won to 1,933.38 won. The industry expects the national average price to also exceed 2,000 won following the soaring trend of international oil prices.

Accordingly, the government has decided to extend the 20% fuel tax reduction measure for three months until the end of July. Additionally, it plans to consider expanding the fuel tax reduction rate depending on future oil price trends.

The basis for the argument to increase the fuel tax reduction is that the effect of the fuel tax cut implemented in November last year has been offset by the rise in international oil prices.

If the fuel tax is reduced by 30%, the tax on gasoline per liter will drop to 574 won. This is a decrease of 246 won compared to before the tax cut (820 won).

This is 82 won less in tax compared to the 20% reduction rate.

Also, if the fuel tax is cut by 25%, the tax will be 613 won, which is 207 won lower than before the cut and 43 won less than the 20% reduction.

However, there are also opinions that it will not be easy for the transition committee to decide on a fuel tax cut before the new government takes office. In 2008, the Lee Myung-bak administration's transition committee decided to implement a 10% fuel tax cut on gasoline and diesel after the new government took office, not during the transition period.

With international oil prices recently turning downward, the burden of price increases has somewhat eased. On the 10th (local time), the April West Texas Intermediate (WTI) crude oil price fell by $2.68 (2.5%) from the previous trading day to $106.02 per barrel.

Some argue that domestic gas station prices are excessive compared to the increase in international oil prices.

The Energy and Petroleum Market Monitoring Group stated, "Gas stations raised prices without fully reflecting the fuel tax reduction and previous decreases in international gasoline prices," adding, "Prices have risen too sharply compared to the recent increase in international oil prices, causing greater harm to consumers."