[Oil Prices and War] Wholesale Gas Station Prices Disclosure Imminent... Windfall Tax Controversy Continues, Another Setback for Refiners

[Part 1] Controlling Oil Prices by Inducing Competition... Enforcement Decree Revision Proposed
Government: "Opaque Selling Prices Do Not Follow Supply and Demand Logic"
Refineries: "Violating Market Economy Principles Will Cause Side Effects"

[Asia Economy Reporter Choi Seoyoon] The government’s renewed push to disclose regional supply costs of gas stations is causing concern in the refining industry. The refining sector argues that detailed disclosure of supply prices constitutes trade secrets, violating market economy principles and potentially causing market disruption and other side effects. Given that this policy is being revisited after 12 years, the government is taking a firm stance. They explain that changing the current abnormal structure?where over 11,000 gas stations nationwide purchase gasoline without knowing the prices from refiners?is essential to stabilizing the volatile fuel prices.

The Regulatory Reform Committee (RRC) under the Prime Minister’s Office will review the amendment to the Enforcement Decree of the Petroleum and Petroleum Alternative Fuels Business Act, proposed by the Ministry of Trade, Industry and Energy (MOTIE), on the 24th. If the amendment passes this committee, it will be finalized and implemented as a presidential decree at the Cabinet meeting. Previously, MOTIE collected comprehensive opinions from related agencies last year and concluded through its own RRC review, composed of external experts, that there were no issues with the amendment.

Seoul gas station scene / Photo by Hyunmin Kim kimhyun81@

This amendment focuses on reducing regional disparities by disclosing the wholesale prices of petroleum products sold by refiners to gas stations at the metropolitan city and province levels. It also includes a provision requiring reporting of regional prices and sales volumes to MOTIE. Currently, only the average selling price of the total domestic sales volume is subject to disclosure.

Transactions between refiners and gas stations are conducted on a post-settlement basis. Gas stations first pay an advance to refiners and receive a certain amount of fuel. The following month, refiners “appropriately” settle accounts, at which point the gas stations learn the prices. A MOTIE official said, “Because of this unique method where the fuel price brought in at the beginning of the month is settled the next month, retail gas stations have no room to negotiate prices when dealing with large refiners.” He added, “Since refiners set the prices, the market does not operate on supply and demand logic.” He further explained, “If the scope of price disclosure is detailed so that gas stations within the same region know wholesale prices, they can negotiate with refiners based on those prices. Gas stations will trade with refiners offering cheaper prices, fostering price competition, which will ultimately lower consumer prices.” There is also a view that detailed disclosure of wholesale prices will lead to continuous monitoring by not only the government but also consumer organizations, putting pressure on refiners to reduce prices.

The refining industry opposes this, claiming it infringes on trade secrets. They argue that the government is excessively intervening in a petroleum market that is 100% privately operated. If transaction details are disclosed to third parties or competitors, pricing will be set at a level that avoids losses compared to other companies, diminishing contract elements such as product quality, volume, and logistics costs. A refining industry insider said, “Since gas stations vary in size, it is common to set lower prices for large volumes. There is also concern that competitors’ pricing policies being fully disclosed could lead to upward price harmonization to secure higher margins.”

A gas station in downtown Seoul / Photo by Mun Ho-nam munonam@

The industry also disputes the claim that the fuel tax reduction is not properly reflected in prices, which is the reason for pushing the policy. Another refining industry official said, “Company-operated gas stations immediately reflect the fuel tax reduction in prices, even absorbing losses on inventory purchased before the tax change. Demanding that privately owned gas stations, which account for 80% nationwide, immediately reflect the tax reduction on pre-tax cut inventory infringes on the owners’ private property rights.”

There are also claims that regulations are excessive compared to overseas. The refining industry points out, “Korea discloses individual gas station retail prices in real time through the Korea National Oil Corporation’s price information system ‘OPINET,’ which is a higher level of regulation than other countries that disclose regional average retail prices on a weekly basis.” In response, a MOTIE official said, “The domestic market is an oligopoly evenly divided among four refiners: SK Innovation, GS Caltex, S-Oil, and Hyundai Oilbank. However, in the US, Europe, and Japan, there are 30 to 50 refiners domestically, and large retailers like supermarkets and convenience stores purchase in bulk, giving them purchasing power. There is no overseas market structure where retailers face off against large corporations.”

The disclosure of regional supply prices is an issue the government pursued in 2009 with nationwide wholesale price disclosure and again in 2011 but was shelved. A MOTIE official explained, “At that time, the introduction of discount gas stations, which had a huge impact, was imminent, and there were also issues about increasing transparency in petroleum transactions through electronic commerce.” He added, “There was a sentiment to wait and see regarding the disclosure of refiners’ wholesale prices, and the RRC application to the Prime Minister’s Office was not even submitted.”