Oil product prices rose 2.1% through November this year, the highest level in three years. The government is discussing whether to extend the fuel tax cut, which has been in place for more than four years, into the new year.
According to the Korean Statistical Information Service (KOSIS) on the 7th, consumer prices for oil products in January–November this year rose 2.1% from the same period a year earlier. Based on January–November, oil product prices, which surged 23.7% in 2022 due to the Russia-Ukraine war, fell in succession in 2023 (-11.6%) and 2024 (-1.3%) before turning higher this year.
By item, gasoline prices rose 1.7% from the same period last year. Diesel and automotive LPG prices rose 2.7% and 5.8%, respectively.
The data office said, "In addition to the won-dollar exchange rate's upward trend, the gradual rollback of the fuel tax cut has recently pushed up oil product prices." Earlier, starting on Nov. 1, the government adjusted the gasoline cut rate from 10% to 7% and the diesel and liquefied petroleum gas (LPG) butane cut rate from 15% to 10%. This led to increases of 25 won and 29 won per liter (ℓ) for gasoline and diesel, respectively.
In fact, the weekly average prices of gasoline and diesel at domestic gas stations have risen together for six straight weeks. According to Opinet, the oil price information system of the Korea National Oil Corporation (KNOC), the average retail price of gasoline at gas stations nationwide in the first week of December (Nov. 30–Dec. 4) was 1,746.7 won per ℓ, up 1.7 won from the previous week. The average retail price of diesel was 1,662.9 won, up 2.5 won from the previous week.
The government is reviewing the fuel tax stance for the new year, as oil product prices have a large impact on overall consumer prices. The Ministry of Economy and Finance plans to decide as early as mid-December whether to extend the temporary fuel tax cut, taking into account variables such as oil prices, the exchange rate, and inflation.
Currently, the fuel tax has been temporarily reduced 18 times since the end of 2021. The government extended it by two more months through the end of this year while partially reducing the cut rate.
Some observers say that with the recently entrenched high exchange rate around 1,470 won and rising international gasoline prices, a full end to the fuel tax cut will be difficult. A government official said, "We are monitoring market conditions," adding, "nothing has been decided at this point."