Consumer prices for liquefied petroleum gas (LPG) in August are expected to fall by about 40 won from July. The government decided to exempt the sales levy imposed on auto LPG butane through the end of the year starting on the 30th.
Although international LPG prices fell sharply, that part is not expected to be reflected in August consumer prices. LPG importers argue they were unable to raise consumer prices in line with the government's price-recognition stance when international LPG prices surged after the war between the United States and Iran, and as a result have accumulated deficits by selling at a loss.
According to the industry on the 31st, the government approved a revision to the enforcement decree to temporarily exempt the sales levy (about 36.37 won per liter) on auto LPG butane through the end of this year. It took effect upon promulgation on the 30th.
E1 and SK Gas immediately cut auto butane supply prices by 40 won per liter, reflecting the sales levy exemption. E1's domestic butane supply price fell from 1,044.22 won per liter to 1,004.22 won, and SK Gas's butane supply price also dropped from 1,045.39 won per liter to 1,005.39 won. Usually when LPG supply prices change, filling station prices reflect the change with a lag of about three days.
LPG importers plan to announce August LPG supply prices again on the evening of the 31st, the end of the month. The industry sees a strong possibility that they will carry over the sales levy exemption prices announced on the 30th as-is. An industry official said, "We have to set August LPG prices on the 31st, and with the government having lowered prices by removing the sales levy, it is difficult for corporations to raise them again to take profit."
The July international LPG contract price (CP), which affects domestic August LPG prices, has fallen sharply. In July CP, propane was set at $580 per ton and butane at $600. They plunged by $180 (23.7%) and $220 (26.8%), respectively, from the previous month.
The drop was driven by easing geopolitical tensions in the Middle East, which lowered international crude prices. LPG is a byproduct from refining crude oil, so when international crude prices fall, LPG prices also go down. Aramco, the Saudi Arabian state oil company that sets CP, prioritizes the trend in international crude prices when reflecting it in CP.
In the domestic LPG industry, despite the sharp drop in July CP, factors for LPG price increases are still seen at about 70 won per kilogram. Compared with last month, when price increase factors amounted to several hundred won per kilogram, the burden has fallen significantly, but it is still not a profit zone.
LPG importers such as SK Gas and E1 have argued that costs to procure LPG surged due to rising CP after the Middle East crisis and a stronger dollar, but they could not fully reflect this in domestic sales prices. They say losses have piled up massively and remain in the red, so they cannot immediately reflect the CP cut in prices. Simply put, they claim they are still selling at a loss.
Another official said, "There are still remaining factors for price increases. However, when LPG prices rise, the impact on the vulnerable and ordinary people is significant," adding, "It is a relief that we can at least narrow the deficit by the extent of the July CP decline."