[Diesel Price Shock] The Betrayal of Diesel Hits Industry... A Dead End with No Alternatives (Comprehensive)

Diesel 2,000 KRW per Liter Era
Burden Increasing from Freight Trucks and Generators to Large Corporations

Not a Temporary Factor from the Ukraine War
Fossil Energy Investments Dramatically Decrease
Rapid Shift to Eco-Friendly Energy Due to 'Global Misjudgment'

Natural Gas and Coal Also Soaring
No Substitutes Available
Fuel Tax Elastic Rates Already Applied
Yoon Administration Struggles to Find Solutions

The price of diesel, once called the "oil of the common people," has surpassed 2,000 won per liter, continuously hitting record highs. The relentless rise is causing anxiety across the industry?from freight truck drivers and small business owners using diesel generators to large corporations burdened with logistics costs. The fear of diesel is spreading throughout the entire B2B (business-to-business) sector, starting from the consumer price inflation that people feel directly. The pressure on prices is intensifying.

On the 27th, experts in energy, industry, and economics agreed that the recent surge in diesel prices is not due to temporary factors like the Russia-Ukraine war but is a structural problem. They attribute it to a "global misjudgment" caused by the rapid energy transition policies toward eco-friendly energy.

Professor Son Yang-hoon of Incheon National University’s Department of Economics, former president of the Korea Energy Economics Institute, said, "In previous energy crises, when oil prices rose, natural gas or coal would be used as substitutes to reduce price volatility. Currently, the high price of diesel is accompanied by soaring prices of substitutes like natural gas and coal, leaving us at a 'dead end' with no alternatives."

Professor Jung Yong-hoon of KAIST’s Department of Nuclear and Quantum Engineering explained, "Diesel has a higher calorific value per liter than gasoline. Since it is directly linked to small businesses and consumer prices, subsidies have been provided for diesel, allowing it to be used at relatively low prices." He added, "But can trucks that used diesel suddenly switch to hydrogen fuel just because prices have risen? The problem is the lack of substitutes."

There appears to be no "exit" from the soaring diesel prices, a point experts commonly emphasize. After the pandemic, investments to achieve carbon neutrality and transition to renewable energy systems accelerated. However, investments in fossil energy, which are still necessary during the energy transition process, have sharply declined. With carbon neutrality as the goal of energy policy, new investments in fossil energy looking 10 to 20 years ahead are inevitably shrinking.

Because this is a global and structural issue, experts agree that neither governments nor companies have sharp measures to solve the problem. Professor Lee Deok-hwan of Sogang University’s Department of Chemistry and Science Communication said, "The Moon Jae-in administration already used the flexible fuel tax rate increases in December last year and April this year, so the new government is reluctant to use policy tools amid the rapid rise in oil prices," adding, "They have exhausted those options."

Meanwhile, according to the Korea National Oil Corporation’s oil price information site OPINET, as of 1:30 PM on the same day, the nationwide diesel price recorded 2,004.75 won per liter, and the gasoline price rose by 2.30 won from the previous day to 2,003.83 won per liter.

Domestic gasoline prices first crossed the 2,000 won mark on March 15 this year, entering the 2,000 won range for the first time in about 9 years and 5 months. After falling below 2,000 won in April, prices rose again above 2,000 won due to international oil price increases. Diesel prices surpassed gasoline prices on the 11th of this month. It has been about 14 years since domestic diesel prices exceeded gasoline prices, the last time being June 2008.