Gasoline prices near peak despite higher fuel-tax cut

Economy

Published: 31 May. 2022, 17:14 Updated: 31 May. 2022, 17:39

Gasoline prices near peak despite higher fuel-tax cut

Gasoline and diesel sold at more than 2,000 won per liter at a gas station in Seoul on Monday. The price of fuel, despite a government tax cut, has been rising. [YONHAP]

Gasoline is retailing at 2,012.33 won ($1.6) per liter, up 1.33 won in a day and near an all-time high. In Seoul, the price is 2,088.42 won per liter, up 2.33 won.

The rapid rise in fuel costs comes as Koreans struggle to manage their budgets in an inflationary environment and as the government struggles to support them without further fueling inflation.

Gasoline prices, as tracked by the Korea National Oil Corp., peaked at 2,040 in 2011.

Diesel prices exceeded 2,000 won per liter for the first time last week and have remained above that level. On Tuesday, it sold for 2,008 won per liter, up 0.87 won than the previous day.

In Seoul, the average diesel price is 2,066.5 won per liter, up 0.23 won.

The fuel tax cut was taken to 30 percent from 20 percent on May 1 for a savings of 82 won per liter. Gasoline taxes are 820 won per liter. The 20-percent cut reduces the price by 164 won per liter and the 30-percent cut 246 won per liter.

The Transport Workers' Union estimates that due to the increase in the diesel price, a truck driver of a 25-ton cargo truck will spend 2 to 3 million won a month more than a year ago.

With diesel prices rising above 2,000 won per liter for the first time, the government earlier this month announced plans to provide support for those facing higher spending due to the higher prices.

West Texas Intermediate traded at about $118 per barrel on Tuesday, still slightly off its peak though up 74 percent on year.

The Institute for International Trade under the Korea International Trade Association in a recent study projected energy prices to stabilize in the second half.

"Global institutions have been projecting crude prices to decline slightly in the second half," said Hong Ji-sang, a KITA senior researcher. "It is likely that Saudi crude will be imported at prices lower than the official selling price."

The researcher added that Korea's trade deficit will likely fall once the supply of crude stabilizes.

A researcher at the Korea Institute for Industrial Economics and Trade expects crude prices to go up further despite increasing interest rates in major economies.

"With the geopolitical risks and the structural problems in supply, international crude prices will likely rise higher in the second half of the year," Hong said.

BY LEE HO-JEONG, KIM KYUNG-MI [lee.hojeong@joongang.co.kr]