Supply prices went up on Sunday on Mar. 1. Gasoline by 116 won, diesel by 221 won, and kerosene by 232 won. So we have no choice but to raise retail prices too. (Employee at S Gas Station in Jung-gu, Seoul),
We're company-operated, so the head office sets the retail price. Prices did go up from last week. (Employee at K Gas Station in Yongsan-gu, Seoul)
On the 5th, gas station employees across Jung-gu, Yongsan-gu, and Seodaemun in Seoul said in unison that the supply price applied by refiners when providing petroleum products to gas stations had risen compared with before the U.S. and Israel's airstrikes on Iran.
An oil industry official also acknowledged the supply price increase. Because international spot market prices are reflected in supply prices, the supply prices had to be raised.
According to the Korea Petroleum Association (KPA), international petroleum product prices traded in Singapore rose between Feb. 27 and Mar. 5—gasoline by 235 won, diesel by 569 won, and kerosene by 1,446 won—just before the U.S. and Israel's airstrikes on Iran.
Multiple refiner officials said, From the refiner's standpoint, we set supply prices by reflecting international spot market prices in addition to international crude prices, and because Singapore spot prices rose, supply prices climbed in tandem.
Amid the fallout from higher supply prices, retail prices at gas stations nationwide jumped. The nationwide average gasoline price per liter (L) rose by 141.7 won, from 1,692.58 won on Feb. 27 to 1,834.28 won on the 5th. Over the same period, the average diesel price per liter increased by 233.01 won (1,597.24 won → 1,830.25 won).
◇ Gas Station Association says supply price hikes are the key, gasoline up more than 100 won in a day
On the 6th, the Gas Station Association said, With the recent surge in international crude, product prices, and the exchange rate, refiners' supply prices have risen, and in a single day gasoline climbed more than 100 won and diesel more than 200 won, putting gasoline at about 1,900 won and diesel at about 2,200 won, adding, The supply price hike has been reflected in gas station retail prices.
Gas station owners and employees met on-site said they refill their tanks as often as daily when sales are brisk, or once every three to four days at the latest. When refiners raise supply prices as they are now, gas stations have no choice but to pass them through to retail prices quickly. They argued there is virtually no stock bought cheaply and stored when supply prices are low, leaving them with no options.
In fact, prices at thrifty gas stations managed by the government also rose all the same. The average price of petroleum products sold at thrifty gas stations increased by 102.81 won from 1,665.20 won on Feb. 27 to 1,768.01 won on the 5th. Although the rise was smaller than the average increase of the four refiners' retail prices (146.84 won), thrifty station retail prices still went up.
Thrifty gas stations are a system introduced under the Lee Myung-bak administration when domestic fuel prices surged amid rising international crude prices. The Korea National Oil Corporation (KNOC) and the Korea Expressway Corporation (KEC) procure petroleum products from SK Energy through joint purchasing, and NongHyup procures from S-Oil, to supply the thrifty gas stations they operate.
◇ Refiners say supply price hikes aren't everything; taxes and gas station margins also play a role
Refiners say higher supply prices are not the only factor driving fuel prices up. For company-operated stations, which make up about 20% of all gas stations, refiners can adjust retail prices to some extent, but independently run stations set their own margins.
Refiners also point to the structure in which taxes (transportation, energy and environment tax; education tax; mileage tax; and value-added tax) account for more than half of the retail price as another condition for price increases. The retail price consumers pay at gas stations consists of supply price + gas station margin + taxes. And half of the retail price is taxes.
As of the fourth week of Feb., taxes (transportation, energy and environment tax; education tax; mileage tax; and value-added tax) account for 52% of the average refiner gasoline supply price per liter (1,616.18 won).
An oil industry official said, If the retail price rises by 200 won per liter, the amount attributable to supply price is less than 100 won, with the rest being taxes, adding, One way to stabilize fuel prices is to temporarily cut fuel taxes, but after prices rose, only refiners and gas stations have been under attack.
◇ Reflected faster than the usual timeframe for international oil prices to feed through domestically... unusual
Still, it is true that fuel prices rose unusually fast after the U.S. and Israel's airstrikes on Iran. The time it typically takes for international oil prices to be reflected in domestic prices is known to be two weeks. But domestic gas station retail prices rose in less than a week after the U.S. strikes on Iran.
It is unusual considering that even at the end of Feb. to early Mar. 2022, when the Russia-Ukraine war broke out, it took 13 days for gasoline and 11 days for diesel to rise by 100 won per liter.
A refiner official said that when the Russia-Ukraine war broke out, the disruption was limited to supplies of Russian crude, so the impact on Korea was not that large, adding, In this case, with the Strait of Hormuz effectively blocked, the shock to the domestic market, which is highly dependent on Middle Eastern crude, appears to have been reflected.
Another refiner official also said, The market and consumers are feeling the seriousness of this situation more than before, temporarily increasing forward-buying demand, adding, A surge in consumers rushing to fuel up even a day sooner also contributed to price hikes.