Gasoline prices near recent highs despite 2021 tax cut

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Gasoline prices near recent highs despite 2021 tax cut

A sign shows gasoline prices at a gas station in Seoul on Sunday. An average gasoline price in the first week of February was up 15.2 won from the previous week to 1,667.6 won per liter, according to Opinet, an oil price information provider. [NEWS1]

A sign shows gasoline prices at a gas station in Seoul on Sunday. An average gasoline price in the first week of February was up 15.2 won from the previous week to 1,667.6 won per liter, according to Opinet, an oil price information provider. [NEWS1]

 
Gasoline prices have increased for three weeks straight, further squeezing the budgets of Koreans already weary from the pandemic and higher prices overall.    
 
The average gasoline price at gas stations nationwide was 1,667.6 won ($1.4) per liter in the first week of February, up 15.2 won from the previous week, according to data by Oil Price Information Network, a website with oil price information run by National Oil Corporation. Gasoline prices in Seoul were as high as 1,738.6 won, up 13.5 won.  
 
The Covid-19 pandemic depressed energy prices in 2020. But prices have recovered quickly as supply has not kept up with demand.  
 
The Organization of the Petroleum Exporting Countries (OPEC) agreed on Feb. 2 to stick to a plan to increase production next month by a relatively modest 400,000 barrels a day. In some countries like Libya, political turmoil has reduced output in recent months, while Ukraine-Russia geopolitical tensions are raising concerns about tighter oil supply.
 
Western oil companies are drilling fewer wells than in the past as they face pressure from investors and environmental activists.  
 
Oil prices hit seven-year highs on Friday with West Texas Intermediate, the U.S. oil benchmark, jumping over $92 per barrel, the highest level since 2014.  
 
Global supply shortages have driven up gasoline prices despite the government's 20 percent tax cut on fuel. The cut, effective Nov. 12, reduced the price of gasoline by about 164 won per liter — gas is taxed at 820 won per liter plus the 10 percent value-added tax.
 
If it weren't for the tax cut, gasoline prices would probably be higher now than they were in October before the tax cut.
 
The recent high for gasoline prices was 1,807 won per liter in the second week of November.
 
Average prices could break the 1,800 won-mark again this month, according to local media reports, as it takes two to three weeks for global oil prices to be reflected in local gasoline prices.  
 
While the fuel tax cut is scheduled to end in April, the government is considering extending the tax cut due to high global oil prices.  
 
The ministry "will continuously review the effectiveness of the fuel tax cut and strengthen the monitoring of the petroleum price," said Lee Eog-weon, first vice minister of economy and finance, at a vice-ministerial meeting on Jan. 28. He added that "extending the fuel tax cut will be reviewed."
 

BY JIN MIN-JI [jin.minji@joongang.co.kr]
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