[why&next] Rising Electricity and Gas Prices... This Winter, Households and Industries Face Greater Cold

[Betrayal of Oil Prices]② 82% of Kerosene Used for Household Heating
Oil Boilers Used in Rural and Suburban Areas Without City Gas Supply
Tax Relief Measures Needed for Energy-Vulnerable Groups Including 'Excise Tax' Deferral

Editor's NoteIt has been one year since the government introduced the fuel tax reduction card as a measure against high oil prices. Although the once sharply rising fuel prices have recently stabilized, the sighs of ordinary people have deepened. This is because the abnormal phenomenon of diesel and kerosene prices, considered representative "fuel for the common people," being sold at higher prices than gasoline, is prolonging. People chose diesel cars to reduce the burden of fuel costs, but instead, their losses are increasing, and ordinary people using kerosene boilers for heating are only worried about heating expenses. There are calls for tailored measures to reduce the burden on ordinary people, such as temporarily suspending the individual consumption tax on kerosene. Asia Economy will explore the causes of the abnormal fuel price phenomenon, its economic ripple effects, and what measures are needed in households and industries.

[Asia Economy Reporter Jeong Dong-hoon] The betrayal of kerosene and diesel prices, once called "fuel for the common people," is expected to add difficulties to households and industrial sites, especially this winter. As the damage to energy-vulnerable groups and industries becomes visible, there are calls for government action.

According to the Korea Petroleum Association on the 23rd, last year’s domestic kerosene consumption was 16.813 million barrels, of which 13.84 million barrels (about 82.31%) were concentrated on household and commercial heating. Among the 37.823 million barrels of household and commercial consumption, kerosene accounted for 13.84 million barrels (about 36.59%), and LPG was the most consumed at 19.529 million barrels (about 51.63%). Notably, about 60% of this consumption was concentrated in winter (November to February).

Kerosene is especially used as fuel for agriculture and household heating. Therefore, it was called "fuel for the common people," but its price has risen more than 70% in the past year, making it awkward to attach the name "common people’s fuel." Recently, an inversion phenomenon has even appeared in some regions where kerosene prices surpass gasoline prices. For low-income vulnerable groups using oil boilers in rural or suburban areas where city gas is not supplied, heating cost worries are foremost this winter.

As agricultural heating oil prices rise excessively, facility farms are on the verge of giving up their livelihoods. Heating costs for one vinyl greenhouse reach about 3 to 4 million won, and many farms are switching to electric facilities or abandoning winter farming to reduce heating cost burdens.

The soaring diesel prices are tightening the industrial sites. Diesel is used across industries including freight transport, manufacturing, agriculture, and metal industries. Among these, it is mainly used in transportation equipment such as trucks, excavators, ready-mix concrete trucks, and generators, and is used as a representative real indicator to judge the economy along with cement. Since it is widely used in transportation equipment, the rise in diesel prices inevitably leads to increased transportation costs in manufacturing. Companies are expected to face a harsh winter amid the complex crisis.

Experts point out that diesel and kerosene prices show no signs of calming down and that measures for energy-vulnerable groups are necessary.

Accordingly, Professor Yoo Seung-hoon of the Department of Energy Policy at Seoul National University of Science and Technology explained, "With the 37% reduction in fuel tax, gasoline is cheaper than a year ago. On the other hand, diesel and kerosene prices have risen internationally due to increased demand, so domestic factory prices are also relatively high." He added, "There is a high possibility that kerosene prices will rise further due to increased demand for heating and aviation fuel," and said, "To reduce the burden on ordinary people, it is necessary to temporarily suspend the individual consumption tax on kerosene at least during winter."