Government slashes price of LNG by 10 percent

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Government slashes price of LNG by 10 percent

The government will slash the price of liquefied natural gas (LNG) next month by 10.1 percent, the biggest cut ever, to reflect the recent oil price drop and help stabilize consumer price growth, the Ministry of Trade, Industry and Energy said on Sunday.

It is the second gas price cut in two months and the biggest since the nation started to use LNG, the ministry said. The lower gas price is expected to reduce the growth rate of consumer prices by 0.18 percentage point and lower producer prices by 0.23 percentage point.

In January, the ministry cut the price by 5.9 percent.

The price of LNG is determined by that of crude oil because unlike liquefied petroleum gas, LNG is produced mostly by refining crude oil. Under the current system, oil price changes of more than 3 percent are automatically reflected in national energy bills every two months.

The average price of Dubai crude, which accounts for about 86 percent of the country’s total oil imports, has tumbled from $104 per barrel in January last year to $57.7 as of Friday, data from the Korea National Oil Corporation showed.

“Plunging oil prices in November and December have enabled a sharp reduction in the LNG price starting in March,” the ministry said in a statement.

The latest price cut will save the country’s 16 million households that are supplied LNG about 75,000 won ($68) per year, the ministry said. It estimates that total LNG costs for this year will be about 601,000 won per household.

The average price of the fuel will be 18.4 won per megajoule, the ministry said.

“The latest price reduction is expected to ease the burden on businesses using LNG for their production, and contribute to a stabilization of growth in consumer prices,” the statement said. “If the oil price keeps falling in the future, the government will swiftly adjust the LNG price in order to help reduce the burden on working-class people from their energy bills.”

As part of its welfare plan, the government plans to further cut the LNG price this year for households in areas that are hit hard by extreme weather or natural disasters.

For households in the bottom 40 percent of the income bracket, the government also plans to introduce energy vouchers worth 36,000 won per month to help pay for heating from December through February.

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