Gas prices hit eight-year high as 1 liter closes in on 2,000 won

A gas station in downtown Seoul charges 2,277 won ($1.85) per liter of gasoline on March 9. [NEWS1]

Gasoline prices hit an eight-year high on Wednesday as the war in Ukraine and sanctions on Russia in response to the invasion drive up global oil prices.

The average price of gasoline at stations nationwide was 1,887.62 won ($1.53) per liter as of 2 p.m. Wednesday, up 27.01 won from the previous day, according to Opinet, a website with oil price information run by Korea National Oil Corporation.

In Seoul, the average price was 1,957.5 won, up by 26.2 won from the previous day.

Brent crude was trading at about $129 barrel on Wednesday after rising as high as $132 in recent days.

The United States on Tuesday announced a ban on Russian oil and other energy imports in retaliation for the invasion of Ukraine.

On Nov. 12, the Korean government cut the fuel tax by 20 percent, reducing the cost by about 164 won per liter — gas is taxed at 820 won per liter plus the 10 percent value-added tax.

This is a bigger break than the last time international oil prices spiked — in 2018 and 2019 — when they were cut 15 percent.

The policy was to end in April but has been extended for another three months.

Changes in international oil prices take two to three weeks to feed through to local gas prices.

The weakening value of won is another issue. The won is weakening against the dollar, which means Korea has to pay more to import crude oil and other commodities.

The local currency closed at 1,237 won against the dollar on Tuesday, steeply up 9.9 won from the previous session's close.

Finance Minister Hong Nam-ki on March 4 suggested that he is reviewing a plan to cut the fuel tax to 30 percent if the situation continues and crude oil price rises to around $150 to $160 a barrel.

"But one thing we are concerned about is that the reduction of fuel tax will be of little avail if international crude oil prices rise continuously," said a spokesperson for the Ministry of Economy and Finance. "If this situation lasts through the end of the year, it would be nothing more than the country loses trillions of tax revenue but being no help to anyone."

BY CHO HYUN-SOOK, SARAH CHEA [chea.sarah@joongang.co.kr]