National Gasoline Prices Rise 133 Won This Week... Largest Increase in 24 Years Since IMF Crisis

Gasoline Prices Rise 133 Won This Week... Largest Increase Since IMF
Russia's Invasion of Ukraine Causes Sharp Surge in Global Oil Prices
Domestic Gasoline Prices Reflect International Oil Prices with 2-3 Week Delay

[Image source=Yonhap News]

[Asia Economy Reporter Moon Chaeseok] This week, the weekly increase in gasoline prices sold at domestic gas stations recorded the largest rise since the International Monetary Fund (IMF) foreign exchange crisis. The price per liter rose by more than 130 won compared to the previous week. This reflects the surge in international oil prices following Russia's invasion of Ukraine, with a 2-3 week time lag, making further increases inevitable. Especially considering that most gas stations are independently operated, making it difficult for refiners to control nationwide gas prices, experts predict that the upward trend in gasoline prices could be prolonged as the war continues.

According to the Korea National Oil Corporation’s oil price information service Opinet on the 18th, the nationwide gasoline sales price at gas stations for the third week of this month (13th-17th) was recorded at 1,994.4 won per liter, up 132.8 won from the previous week. Since the government’s fuel tax reduction measures, domestic gasoline prices, which had fallen to 1,621 won (second week of January) earlier this year, have been rising for nine consecutive weeks following international oil prices.

Domestic gasoline prices have been increasing by about 20 won per liter weekly since last month, then jumped by 97.7 won last week, and 132.8 won this week, showing an expanding rate of increase. A rise of over 100 won in a single week has not been seen since the fourth week of December 1997 (161.3 won), when domestic gasoline prices soared due to a sharp depreciation of the exchange rate during the foreign exchange crisis, nearly 24 years ago.

The Korea Petroleum Association explained, "The recent sharp rise in international oil prices, influenced by Russia’s invasion of Ukraine, has been reflected in domestic fuel prices with about a two-week time lag."

The daily average gasoline price at gas stations nationwide has already surpassed the 2,000 won per liter mark since the 15th of this month. As of 5:30 PM on that day, the nationwide average gasoline price was 2,002.56 won per liter, down 0.86 won from the previous day. In Seoul, it was 2,082.39 won.

The concern is that gasoline prices will continue to rise as the war prolongs. Experts advise considering policy support to increase the fuel tax reduction rate from 20% to 30%. Since directly operated gas stations account for only about 10% of the total, refiners find it difficult to control gas station prices. Additionally, the sales structure includes not only crude oil prices but also fuel taxes (transportation energy environment tax, driving tax, education tax), value-added tax, crude oil import tariffs, petroleum import surcharges, and refiners’ margins, which cannot be ignored.

Professor Kim Young-ik of Sogang University Graduate School of Economics said, "Although oil prices have started to decline, considering that the consumer price index lags oil prices by about two months and the possibility of prices rising again in the future, it is necessary to consider a temporary adjustment of the fuel tax reduction." He added, "If oil prices rise, not only will inflation increase, but real income will decrease and consumption will contract, increasing the likelihood of a vicious cycle of stagflation (rapid inflation amid economic stagnation), which could further burden ordinary citizens."

Meanwhile, the average price of Dubai crude oil, the benchmark for domestic imported crude, was surveyed at $103.3 per barrel this week, down $17.1 from the previous week. The average international gasoline price also fell by $18.3 to $120.2 per barrel compared to the previous week.