Domestic liquefied petroleum gas (LPG) prices are rising steeply. Expense burdens are growing for livelihood drivers who operate LPG vehicles and for residents who need LPG cylinders. With costs that affect domestic LPG supply prices—such as international crude prices, the won's exchange rate against the U.S. dollar, and ocean freight—climbing one after another, LPG prices are expected to keep rising for the time being.
According to the gas industry on the 7th, E1 and SK Gas decided to raise May LPG supply prices by 140 won per kilogram. It is unusual for the LPG supply price to rise by more than 100 won at once. It is the record high since Jan. 2011 (160 won per kilogram) and Nov. 2021 (165 won per kilogram).
Retail prices at LPG filling stations nationwide are also on the rise. According to Opinet, the oil price information site of the Korea National Oil Corporation (KNOC), the national average LPG price broke 1,000 won per liter (ℓ) in March and was trading at 1,089.16 won as of the 6th.
Seoul has the most expensive LPG prices nationwide, with the regional average nearing 1,150 won. Next, the regional averages in Gangwon, South Jeolla, Daegu, Ulsan, and Jeju were also in the 1,100-won range.
When LPG prices rise, the backbone of the working-class economy is shaken. That is because LPG is widely used in rural and coastal areas not served by city gas pipelines, in older dwellings, and in restaurants.
It is also used as fuel for livelihood transport such as taxis and 1-ton (t) trucks. When fuel expenses increase, transport revenue declines. LPG is also used in vehicles for people with disabilities and in rental cars.
Despite three consecutive months (March to May) of price hikes, the LPG importing industry says the factors for a May increase were not fully reflected in the LPG retail price. They said domestic prices are adjusted with a time lag.
An official at an LPG company said, "In line with the government's price stability stance, we limited the increase and set it at 140 won per kilogram," and noted, "We assess the actual May LPG price increase factor at 500 won per kilogram."
June LPG prices also face significant uncertainty. Domestic LPG supply prices are set based on the LPG contract price (CP) notified by Saudi Aramco, and due to the Middle East crisis, the LPG CP has jumped 40% compared with the start of the year. During that time, domestic LPG supply prices rose only 20%.
The rise in the won-dollar exchange rate and ocean freight is another source of concern.
Another industry official said, "Compared with international prices, domestic LPG supply prices tend to rise and fall slowly," adding, "With price increase factors still remaining, LPG prices are likely to keep rising for the time being."
Meanwhile, to ease fuel expenses, the government expanded the fuel tax cut on LPG butane to 25% from 10% starting May 1. With this measure, the butane fuel tax is cut by an additional 31 won per liter, for a total price reduction effect of 51 won. As this is a temporary measure through the end of June, LPG users are watching closely to see whether it will be extended.