Since the government implemented a petroleum price cap, gas stations have closed at an average pace of one per day over the past three months. The closure pace has quickened as independent gas stations suffer severe business difficulties.
According to the Korea National Oil Corporation (KNOC) Opinet on the 13th, as of the 11th, there were a total of 10,296 gas stations operating nationwide. Compared with the 10,392 stations the day before the price cap took effect (Mar. 13), the total fell by 96 over three months. A simple calculation shows operations ceased at a rate of one per day.
Even before, the number of gas stations nationwide had been decreasing every year. But the decline steepened after the price cap took effect. At the start of the year, there were 10,437 gas station business sites nationwide, and 45 gas stations stopped operating in the three months leading up to the cap. Compared with the three months since the petroleum price cap took effect, the closure pace has effectively doubled to 96.
Gas stations are closing primarily because profitability has worsened. According to the Ministry of Data and Statistics (MODS), operating margins at gas stations were 17.8% in 1991 and 11.5% in 2001, but fell to 1.7% in 2023. The gas station association estimates that margins at many stations have recently dropped into the 0% range.
In particular, independent gas stations are facing severe operating challenges recently. Consumers defect even if prices are just 1 won per liter (ℓ) higher than nearby stations, forcing them to compete on price with refinery-operated stations and budget stations that have cheaper supply prices. The supply prices that refiners charge individual stations have been disclosed, further heightening consumers' price sensitivity.
Many owners say they lose money the more petroleum products they sell. As of the morning of the 12th, the nationwide average retail price of gasoline was 2,009.66 won per liter. If gasoline is sold at that price, after subtracting the 6th price cap gasoline supply price of 1,934 won and a 30 won card fee, 44.66 won per liter remains. Gas station owners say that after deducting various operating costs such as labor and electricity, nothing is left.
Differences in refinery support measures for gas stations are also intensifying price competition. SK Energy decided to provide 30 won per liter for petroleum products ordered by independent stations during the price cap period. According to Opinet, in the fourth week of May, SK Energy's average gasoline supply price to stations was 1,927.21 won, cheaper than GS Caltex (1,929.64 won), S-Oil (1,931.62 won) and HD Hyundai Oilbank (1,933.47 won).
However, retail prices to consumers vary depending on factors such as inventory drawdown timing and station location. In the first week of June, gasoline prices by refinery brand were lowest at budget stations (1,996.21 won), followed by S-Oil (2,010.89 won), HD Hyundai Oilbank (2,011.05 won), GS Caltex (2,013.61 won) and SK Energy (2,014.44 won).
Although side effects from the prolonged price cap are growing, the government believes conditions are not yet in place to consider ending it. The Ministry of Trade, Industry and Resources previously said the conditions for ending the cap include the lifting of the Strait of Hormuz blockade so passage is free, and international oil prices stabilizing below $90 per barrel without a sharp surge.
An announcement related to the 7th price cap is scheduled for the 18th, and the current system is likely to continue for the time being. An official at the Ministry of Trade and Industry (MOTI) said, "The Strait of Hormuz blockade is ongoing, so it is hard to say stability has been achieved," adding, "International oil price volatility is high, making it difficult to judge that price instability has been resolved."