A person surnamed Park in his 50s, who runs a gas station in Yangju, Gyeonggi Province, has set up a sign at the entrance reading "closed today" since on the 5th and has been closed for a week. After the Middle East crisis, refiners raised fuel prices by 100 won or 200 won at a time, so instead of refilling the gas station's storage tanks with expensive new fuel, he decided to shut the doors for a while.
Park said, "Because I set the retail price by considering the going rates at nearby budget and company-operated gas stations, I can't just raise prices as is," adding, "It's better not to operate than to buy high and sell at the lowest price."
A person surnamed Kim in his 40s, who runs a gas station in Taean, South Chungcheong Province, removed kerosene from the price board on the 7th. Kerosene is mainly used for heating in rural areas, and from this month the refiner supply price has jumped into the 2,000-won range. Kim thought that if he took it at that price and sold it, neighborhood customers would have harsh words.
The day after removing kerosene, Kim ultimately set up a sign at the gas station entrance that read, "As of now, the refiner supply price far exceeds the retail price, so we are temporarily closed. We apologize for the inconvenience," and decided to suspend operations temporarily.
A gas station in Yeongju, North Gyeongsang Province, recently shortened its operating hours. The hours used to be 6 a.m. to 10 p.m., but starting over the weekend they were cut by three hours to 7 a.m. to 8 p.m.
The station owner, a person surnamed Park in his 50s, said, "Because I didn't raise fuel prices, transient customers flocked in, saying, 'It's 1,900 won elsewhere, but is it still 1,700 won here?' and they filled up and left," adding, "If the tank runs dry, I'll have to restock at high prices, so to defend supply I'm shortening hours and focusing on regulars."
◇Gas stations say "we don't know what we'll be charged"… the trap of 'monthly average post-settlement'
According to the refining industry on the 13th, as domestic gasoline and diesel prices surged after the Middle East crisis, some gas stations began temporary closures or reduced their operating hours. Most were independently run stations in outlying areas where individuals receive fuel from agencies. Contrary to suspicions that gas stations are gouging consumers, they argued that "the more we operate, the more we lose."
They agreed that they made these decisions because, structurally, it is hard to pass on refiner hikes in gasoline and diesel supply prices right away. Typically, an independent station owner looks at local rates and sets that day's retail price. If there are budget or company-operated stations nearby that receive fuel more cheaply than independents, fierce price competition breaks out to attract customers.
Not knowing exactly what price they are paying for petroleum products from refiners also complicates pricing decisions. Among the contracts between refiners and stations is a "post-settlement system," under which fuel is delivered first and the price is settled later. The station pays first at a tentative price set by the refiner at the time of purchase (tentative purchase cost) and then, a month later, re-settles at the confirmed price. This is called monthly average post-settlement.
The smaller the storage tank, the faster inventory turns over, and the worse the cash flow, the more likely a station is to use monthly average post-settlement. Without knowing exactly how much the refiner will bill a month later, they end up setting prices on the fly. Especially during a period of sharp oil price increases, when average supply prices rise daily, there is a high chance they will be billed additional amounts at post-settlement.
An operator said, "Stations that use monthly average prices for post-settlement get blindsided a month after receiving fuel," adding, "Because we can't know the purchase price, stations can end up selling at a loss, while refiners never take a loss—an unfair system has been created."
The refining industry says it adopted the post-settlement system to reduce price volatility. Crude and petroleum product prices change daily, but calculating an average price over a set period for settlement can reduce volatility. When prices fall, stations receive a refund at post-settlement. They receive it as points, not cash, which can be used for the next purchase.
◇'Petroleum price cap' implemented… supply prices fell, but 'inventory losses' fall on gas stations
Meanwhile, starting today, with the government implementing a petroleum price cap, refiner supply prices edged down. The maximum prices by product are 1,724 won per liter for regular gasoline, 1,713 won for automotive diesel, and 1,320 won for indoor kerosene. For petroleum products supplied to island regions, the caps are 1,743 won for regular gasoline, 1,732 won for automotive diesel, and 1,339 won for indoor kerosene.
Retail prices at gas stations are not subject to the price cap, citing managerial autonomy and other reasons. With supply prices now disclosed, the industry says they no longer hear customers accuse them of "overcharging." Some also complain that for inventory purchased at high prices from refiners before the cap took effect, they are now effectively forced to sell at a loss on their own.
On the same day, the three petroleum groups—the Korea Petroleum Association (KPA), the Korea Oil Station Association, and the Korea Oil Distribution Association—said in a statement, "We will actively cooperate to ensure that the rapidly rising international oil price due to the worsening situation in the Middle East is not reflected abruptly in domestic gas station prices."