With the war between the United States and Israel and Iran pushing up the price of liquefied petroleum gas (LPG) transacted in global markets, domestic LPG distribution prices are also expected to rise. LPG importers said they have refrained from raising prices in line with the government's price-stability stance, but the protracted war has made it difficult to hold out any longer.
According to the industry on the 30th, SK Gas and E1, domestic LPG importers, plan to finalize and announce their LPG supply prices on the 1st of next month. Companies usually announce the following month's supply price at the end of the month, but this time they expect the announcement to be slightly delayed as they finalize the size of the increase. Once the supply price is set, it is applied immediately to filling stations and suppliers nationwide.
About 90% of the LPG consumed in Korea is from North America, and the remaining roughly 10% is imported from the Middle East. However, domestic LPG prices are set according to the international LPG price (CP, Contact Price) that Aramco, Saudi Arabia's state-run oil company, announces at the end of each month.
In general, LPG prices track international crude prices. Aramco has not made clear the criteria for setting the CP price, but many expect it will raise the April supply price. From December last year to February, Aramco raised the per-ton price of propane and butane by $20 to $35 each month. March prices were frozen, setting propane at $545 per ton and butane at $540.
Domestic LPG prices have not kept up with the CP increases. Considering consumer fuel-cost burdens, domestic LPG importers froze prices for three straight months from December to February last year. They raised product prices by 25 to 28 won per kilogram in March, but the industry says that did not fully reflect upward pressure.
E1 raised March residential and commercial propane gas prices by 25 won from the previous month to 1,213.17 won per kilogram, and industrial propane gas prices to 1,219.77 won. SK Gas raised residential and commercial propane to 1,215.73 won per kg and industrial propane to 1,315.73 won, up 28 won each.
In addition to a spike in freight and insurance premiums for LPG carriers due to the closure of the Strait of Hormuz, the won-dollar exchange rate climbing above the 1,500-won level against the dollar is also cited as a key reason for a likely price hike. After receiving the CP, SK Gas and E1 add the won-dollar exchange rate, transportation costs, insurance premiums and taxes, and then set the final supply price after considering domestic price conditions.
An industry official said, "Since the start of the year, LPG prices and the exchange rate have risen, but we have not been able to fully reflect that in prices to align with the government's livelihood-stability stance," adding, "We see upward pressure of about 100 won per kg."
However, with local elections coming up in June, some say it will be difficult to sharply raise LPG prices, which directly affect everyday consumer prices. LPG, known as the "fuel for ordinary people," is mainly used by areas excluded from city gas (LNG) infrastructure and by small self-employed business owners.
Another industry official said, "There are many factors pushing prices up, but with the government's oil-price stabilization policy continuing, a comprehensive review is needed."