Since the government implemented the oil price cap, gas stations have closed at an average rate of about one a day over the past three months. The pace of closures has accelerated as management difficulties have intensified for independently owned stations.
According to 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 counted the day before the oil price cap took effect on Mar. 13, the total fell by 96 over three months. A simple calculation shows that operations stopped at about one station a day.
Even before, the number of gas stations nationwide had been declining each year. However, the drop steepened after the oil price cap was implemented. At the start of this year, there were a total of 10,437 gas station business sites nationwide, and 45 stations ceased operations during the three months up to the implementation of the cap. Compared with the three months since the cap took effect, the pace of closures has effectively doubled to 96.
The basic reason gas stations are closing is that profitability has worsened. According to the Ministry of Data and Statistics (MODS), the operating margin for gas stations was 17.8% in 1991 and 11.5% in 2001, but fell to 1.7% in 2023. The gas station association estimates that in recent days individual stations' operating margins have dropped into the 0% range.
In particular, independently owned stations are facing severe operating difficulties recently. In a situation where consumers defect if prices are even 1 won per liter (ℓ) higher than nearby stations, they must compete on out-the-door pricing with refiner-operated company stations and budget stations that have lower supply prices. They also said consumer price sensitivity has increased because the supply prices refiners charge individual stations have been disclosed.
Many owners say they lose money the more petroleum products they sell. As of the morning of the 12th, the nationwide average gasoline retail price was 2,009.66 won per liter. If gasoline is sold at that price, after subtracting the sixth cap's gasoline supply price of 1,934 won and a 30-won card fee, 44.66 won per liter remains. Station owners say that once they deduct labor, electricity, and other operating costs from that, nothing is left in hand.
Differences in support measures by refiner for gas stations are also intensifying price competition. SK Energy decided to provide 30 won per liter for petroleum products ordered by independently owned stations during the oil price cap period. According to Opinet, as of the fourth week of May, the average gasoline supply price from SK Energy 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, consumer retail prices are set differently depending on factors such as inventory depletion timing and station location. As of the first week of June, gasoline prices by refiner 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).
Despite growing side effects from the prolonged price cap, the government believes conditions are not yet in place to consider ending it. Previously, the Ministry of Trade, Industry and Resources said the conditions for ending the cap would be when the blockade of the Strait of Hormuz is lifted so passage is free, and when international oil prices do not surge and remain stable below $90 a barrel.
An announcement on the seventh price cap is set 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, "Because the blockade of the Strait of Hormuz continues, it is hard to say stability has been achieved," adding, "Given the high volatility in international oil prices, it is difficult to judge that price instability has been resolved."