The government had planned to impose a 1% tariff on crude oil and liquefied petroleum gas (LPG) imports starting in July, but is reviewing a plan to defer it, according to reports on the 12th. The items are currently temporarily duty-free, and the move would extend that period. The decision follows a surge in international energy prices amid the prolonged Middle East war, which has increased inflationary pressures.
According to ChosunBiz reporting, the Ministry of Economy and Finance is discussing an "emergency quota tariff measure" of this kind as an agenda item for the next meeting of economic ministers. A quota tariff applies a lower rate than the basic rate to a limited volume of imports of specific items, and the basic rate for crude oil, LPG, and liquefied natural gas (LNG) is 3%.
Since last year, the government has applied a 0% quota tariff to 165 million barrels of crude oil for LPG production in the first half of this year. In the second half, it had planned to apply a 1% quota tariff with the same volume cap as the first half. For LPG such as propane and butane, a 0% quota tariff is also applied to all first-half imports, but a 1% tariff had been planned for the second half.
With energy prices continuing to rise due to the prolonged Middle East situation, the government is said to be reviewing an extension of the duty-free period. According to the Ministry of Trade, Industry and Resources, West Texas Intermediate (WTI) rose 39.3% from $67.02 per barrel on Feb. 27, just before the war, to $93.35 on the 11th. Brent crude also jumped from $72.48 to $95 over the same period.
LPG prices have also risen sharply. The international price of propane for household and commercial use climbed 37.6% from $545 per ton in March to $750 in April–May, while butane jumped 48.1% from $540 to $800 over the same period. The Japan Korea Marker (JKM), a benchmark for LNG prices, surged about 76% from $10.7 per million BTU on Feb. 27 to $18.91 on the 10th.
Rising energy prices are affecting consumer prices as well. The consumer price inflation rate in May was 3.1%, the highest since July 2022. In particular, petroleum product prices rose 24.2% from a year earlier.
A government official said, "Energy items have such large import volumes that even a slight reduction in tariffs has a big effect," and noted that it is "to minimize the impact of recent increases in international energy prices on domestic inflation."