On the First Day of Expanded Fuel Tax Reduction, Gasoline Down 11.37 Won·Diesel Down 7.38 Won

On the 1st, at Mokhwa Altteul Gas Station in Gangseo-gu, Seoul, where the fuel tax reduction rate was increased from 30% to 37%, gasoline is being sold at 2,057 KRW per liter and diesel at 2,111 KRW per liter. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Donghoon Jeong] Gasoline and diesel prices at domestic gas stations are showing a slight decline on the first day of the fuel tax reduction rate being expanded to 37%.

According to the Korea National Oil Corporation's oil price information service Opinet, as of 10 a.m. on the 1st, the nationwide average gasoline price was 2,133.53 KRW per liter, down 11.37 KRW from the previous day. Diesel prices recorded 2,160.28 KRW per liter, down 7.38 KRW from the previous day.

The fuel tax reduction rate applied to petroleum products was expanded from the existing 30% to 37% starting this day. This created a price reduction factor of 57 KRW per liter for gasoline and 38 KRW for diesel. Accordingly, the rising trend of domestic gasoline and diesel prices, which had been hitting record highs daily, appears to have been temporarily halted.

However, it is expected to take some time for the full effect of the fuel tax reduction to be reflected. Petroleum products typically take about two weeks to be distributed from refineries to gas stations. The fuel tax is applied at the moment the product leaves the refinery. This causes a time lag before the tax reduction is reflected in the retail price.

Ultimately, refiners need to minimize this time lag as much as possible through inventory management and cooperation with gas stations so that consumers can feel the effect of the fuel tax reduction more quickly.

Earlier, petroleum industry associations such as the Korea Petroleum Association, Korea Petroleum Distribution Association, and Korea Gas Station Association announced that they would actively cooperate to ensure the fuel tax reduction effect appears as soon as possible. Domestic refiners began reflecting the reduction immediately from this day and supplied accordingly, and nationwide company-operated gas stations simultaneously lowered their prices by the amount of the fuel tax reduction.

To alleviate the burden of high oil prices, the government had reduced the fuel tax by 20% starting November 12 last year, and expanded the reduction rate to 30% from May 1 this year. As petroleum product prices continued to soar despite the expanded reduction, the government increased the reduction rate to 37% starting this day.