First Day of Expanded Fuel Tax Cut... Will It Ease the Burden of High Oil Prices?

National Average Gasoline Price 1 Liter 1970.9 Won, Down 3.8 Won from Previous Day

On the 3rd, fuel price information is displayed at a gas station in Seoul, where domestic gasoline and diesel prices continue to soar due to the sharp rise in international oil prices. Photo by Mun Honam munonam@

[Asia Economy Reporter Oh Hyung-gil] Fuel prices, which had been soaring due to rising international oil prices, decreased from the 1st as the scope of the fuel tax reduction was expanded.

According to the Korea National Oil Corporation's oil price information site Opinet, the nationwide average gasoline price on that day was 1,970.9 KRW per liter, down 3.8 KRW from the previous day. Diesel recorded 1,918.7 KRW, down 1.8 KRW.

The average prices in Seoul also fell by 12.2 KRW and 7.8 KRW for gasoline and diesel, respectively, to 2,027.2 KRW and 1,982.9 KRW.

The upward trend reversed after six consecutive days since the 24th of last month due to the expanded fuel tax reduction.

From this day, the fuel tax (including 10% value-added tax) imposed on gasoline will decrease from 656 KRW per liter to 573 KRW. The tax on diesel will drop from 465 KRW to 407 KRW, and LPG butane from 163 KRW to 142 KRW.

Gasoline prices were reduced by 83 KRW per liter, diesel by 58 KRW, and liquefied petroleum gas (LPG) butane by 21 KRW due to the tax cuts.

Since November 12 of last year, a temporary 20% reduced fuel tax had been applied. The government extended the fuel tax reduction measure for three months until July 31, as international oil prices exceeded 100 dollars per barrel due to Russia's invasion of Ukraine, and decided to expand the reduction rate to 30% starting in May.

However, even with the expanded fuel tax reduction, it is expected to take about one to two weeks for consumer retail prices to decrease, as the inventory held by gas stations must be depleted.

There is also a possibility that the full amount of the fuel tax reduction may not be reflected in prices at some gas stations.

SK Energy, GS Caltex, S-Oil, and Hyundai Oilbank, the four domestic refiners, have agreed to immediately reflect the additional fuel tax reduction at over 760 directly operated gas stations nationwide starting from this day.