In the United States, a "price inversion" emerged nationwide in which diesel at gas stations became more expensive than gasoline after Israel's airstrike on Iran. As the Strait of Hormuz was blocked, disrupting crude supplies, international diesel prices in the Singapore oil products brokerage market rose more sharply than gasoline.
In times of unstable supply and demand, such as war or economic crisis, diesel prices move more sensitively than gasoline. Diesel is a key power source across industries that underpin a national economy—freight, shipping, construction—so it is hard to sharply cut usage. By contrast, gasoline is used mostly as passenger car fuel, making demand controllable by limiting driving.
According to the Korea National Oil Corporation (KNOC) Opinet price information system on the 6th, as of 10:30 a.m. that day, the nationwide average gasoline price was 1,856.30 won per liter, and diesel was 1,863.66 won. That means, on average at gas stations nationwide, diesel was selling 7.36 won per liter more expensive than gasoline.
Domestic fuel prices are set daily by reflecting the Singapore spot market's international product prices (MOPS), among others. International gasoline rose 25.15%, from $79.63 per Barrel on the 27th, the day before the U.S. airstrike on Iran, to $99.66 on the 4th. Over the same period, international diesel jumped 56.22%, from $92.90 per Barrel to $145.13.
The proportion of petroleum products derived from crude is fixed. When demand exceeds supply, as with diesel, prices rise. Typically, refining one Barrel of crude yields 25% gasoline and 35% to 40% middle distillates that produce kerosene and diesel. In the refining process, it is impossible to skip making gasoline and produce only diesel.
Diesel is used mainly across industries, including freight trucks, buses, ships, construction equipment, and generators. In wartime, tanks, armored vehicles, and other military equipment require massive amounts of diesel. The difficulty of cutting usage even amid supply instability is reflected in diesel prices.
Recently, Middle Eastern countries have not only sold crude but also produced middle distillates directly, serving as key supply hubs exporting worldwide. A Korea Petroleum Association (KPA) official said, "The Middle East exports a lot of middle distillates that make kerosene and diesel, and with the Strait of Hormuz blocked, supply and demand are being disrupted."
Earlier, after the Russia-Ukraine war broke out in 2022, international diesel prices also soared. Russia is the world's third-largest crude producer, and Europe imports 60% of its diesel from Russia.
As economic sanctions over Russia's invasion of Ukraine choked the diesel supply chain, international diesel prices surged. Before the Russia-Ukraine war, international diesel moved around $90 to $100 per Barrel, but in June 2022 it spiked to around $180. Gasoline also climbed to around $150.
With international diesel trading about $30 per Barrel more expensive than gasoline, the domestic market was affected. In June 2022, gasoline sold for 2,100 to 2,140 won at domestic gas stations, while diesel was 2,150 to 2,160 won.
In international markets, diesel usually trades more expensively than gasoline. Product prices are set higher because refining capacity is smaller relative to demand. That is because diesel refining is far more complex than gasoline.
When refining crude, diesel is extracted in the 250–350°C range and requires an advanced hydrotreating process to remove sulfur to meet environmental regulations. Gasoline is relatively easy to extract at lower temperatures of 30–140°C.
By contrast, in the domestic market, diesel has been distributed cheaper than gasoline due to fuel taxes. In the 1970s and 1980s, gasoline was seen as fuel for cars considered luxury goods, while diesel was viewed as an industrial fuel essential to national economic revival. As a result, the government set taxes on gasoline higher than on diesel, and that stance continues today.
Currently, the fuel tax adds 763 won per liter to gasoline and 523 won to diesel. The fuel tax is assessed as a sum of the transportation-energy-environment tax, education tax, and driving tax, among others. In particular, the gap in the transportation-energy-environment tax is large. Kerosene is 337.5 won and gasoline is 492 won, a difference of 154.5 won per liter. Because of this gap, diesel has been cheaper at gas stations.
Shin Hyun-don, a professor at Inha University, said, "The United States and Canada levy higher environmental taxes on diesel, which emits more carbon than gasoline, but in Korea, conversely, more tax with an environmental character is attached to gasoline," noting, "The energy policy used during past periods of economic growth is still being maintained."