The practices of "exclusive transaction," which requires gas stations to sell only a specific refiner's fuel, and "post-settlement," in which refiners supply fuel first and set the price later, are expected to disappear. The Korea Fair Trade Commission plans to unveil a new standard agency transaction contract for gas stations and refiners, aimed at mutual growth, as early as next month.
While some expect that handling products from multiple refiners at gas stations will lower consumer retail prices, concerns remain in the refining industry about potential side effects of the system overhaul.
According to the Korea Fair Trade Commission (FTC) and the refining industry on the 17th, the Korea Fair Trade Commission (FTC) has been making a full revision of the existing standard agency transaction contract for the petroleum distribution sector since April. The Korea Fair Trade Commission (FTC) and the four refiners (SK Energy, GS Caltex, S-Oil, HD Hyundai Oilbank) are in last-minute talks over the final language to be included in the contract.
The core of the new standard agency transaction contract is the abolition of exclusive transaction and the post-settlement system. The exclusive transaction system is a method in which gas stations sell only the products of the refiner with which they have a contract. If the exclusive transaction system is abolished, gas stations can sell other refiners' products in combination. Price competition among refiners could be expected to lower consumer retail prices.
The post-settlement system is a method in which a gas station receives fuel from a refiner first and settles later. The gas station industry has raised concerns that the pricing basis for petroleum products supplied by refiners is opaque. Because gas stations set consumer retail prices without knowing the exact purchase cost, critics also said the structure fuels consumer price hikes when oil prices rise.
An operator of a gas station said, "Smaller stations lack bargaining power, so it's common to sign contracts as the refiner's sales staff suggest," adding, "Until now, the structure ensured refiners never took a loss; if this changes, it might give us some breathing room."
However, in the refining industry, there are strong concerns about the side effects of expanded mixed sales following the abolition of exclusive transaction. If mixed sales increase at a single gas station, the origin of products may become unclear, leading to quality control issues. Refiners have provided facility support funds and marketing expense to gas stations as a condition of exclusive contracts, but if stations sell other refiners' products together, the incentive to support stations diminishes.
A refining industry official said, "If fuel is sold in mixed form and a problem occurs, accountability becomes unclear," adding, "It's also questionable how much support should be provided to places that mix in other companies' products."
Not all gas stations welcome the abolition of the post-settlement system. From the start, post-settlement was not a mandatory condition but one of several contract options. Small gas stations with poor cash flow sometimes prefer post-settlement, a kind of credit transaction. From a gas station's perspective, during periods of major oil price volatility, settling later based on an average price over a set period can be advantageous for price defense.
Reflecting such on-the-ground concerns, the Korea Fair Trade Commission (FTC) is also reviewing including a "conditional clause" in the contract to allow agents (gas stations) to choose existing methods such as post-settlement as an exception if they wish.
The new standard agency transaction contract is expected to apply when new contracts are signed after existing contracts between gas stations and refiners expire. Although the use of the standard agency transaction contract is not a legal obligation, the government's strong recommendation means it is expected to serve as a guideline to improve long-standing transaction practices.
An official at the Korea Fair Trade Commission (FTC) said, "The standard agency transaction contract does not carry legal compulsion, and the contents of contracts may all differ by refiner and gas station," adding, "It is meaningful that gas stations and refiners have reached a social consensus for mutual growth."