At 9:30 a.m. on the 13th, at a refinery-operated gas station in Guro District, Seoul. Cars looking to fill up with gasoline lined up in front of the station. As the "petroleum price ceiling" took effect that day and the gasoline price fell by 100 won from the previous day to 1,850 won per liter (L), drivers flocked in.
An employee said, "Headquarters sent down a pricing guideline, so we adjusted," and noted, "The price changes are so fast that even we who sell it are getting confused."
But at the same time, an independently run gas station in Yongsan District, Seoul, was not operating. That was because it had no inventory on hand after wholesale prices jumped. The operator, a person surnamed Kim in their 60s, said, "We can't just slash prices, so I decided it's better to sit tight than to sell," adding, "I plan to call the sales rep today."
◇ First "price control" in 29 years… on the ground, "the gap feels big"
With international oil prices surging amid instability in the Middle East, the government implemented a "petroleum price ceiling" starting that day. It is the first measure of its kind since oil prices were liberalized in 1997.
The system caps the price at which refiners supply to gas stations, and the first ceiling will remain for two weeks. Regular gasoline was set at 1,724 won per liter, automotive diesel at 1,713 won, and kerosene at 1,320 won. These are lower than the average supply prices submitted by refiners by 109 won for gasoline, 218 won for diesel, and 408 won for kerosene.
However, because the system was announced the previous evening and implemented immediately, both consumers and stations experienced confusion. A person surnamed Jang, 36, who filled up in Seongdong District, Seoul, that morning said, "I heard the ceiling was 1,724 won, so I thought the pump price would drop to that right away," adding, "I only understood after the station staff explained it's based on the supply price."
According to Opinet, the oil price information system of the Korea National Oil Corporation (KNOC), as of 9:30 a.m. that day the average price of regular gasoline in Seoul was 1,906.4 won per liter, down 20.66 won from the previous day. The average diesel price fell 30.64 won to 1,905.53 won. Prices fell in part, but there was a gap with the drop in supply prices.
Stations that had already been selling at low prices said it was difficult to cut further right away. Popular stations known as "best spots for fuel" often operate on a low-margin, high-volume model, increasing sales volume rather than sharply lowering prices to generate revenue.
An employee at a refinery-operated station in Dongjak District, Seoul, said, "Gasoline and diesel prices are the same as yesterday," adding, "Since we have already been selling at low prices, it isn't easy to cut further."
Independent stations, in particular, were slower to adjust prices. That's because they still have petroleum inventory purchased before the ceiling took effect. It takes at least two days and up to about two weeks for stations to run down stock.
Given that the average refinery supply price as of the 11th was 1,833 won per liter for regular gasoline and 1,931 won for diesel, it means it is difficult to cut pump prices indiscriminately while previously received volumes remain.
Around 10:30 a.m. that day, an employee met at an independent station in Guro District, Seoul, hinted that the owner stormed out in anger in the morning. They had brought in fuel at over 1,900 won per liter, only to see the supply price suddenly drop.
The employee said, "Even now, our selling price is 6 won cheaper than the (supply price)," adding, "Considering card fees and labor costs, we need to sell at about 120 won more per liter, but right now the more we sell, the more we lose."
◇ Stations tied up by post-settlement… pace of pump price cuts varies
The customary "post-settlement system" between refiners and independent stations also has an impact.
Stations purchase petroleum products at the deposit price proposed by refiners and usually receive the difference back at settlement about a month later based on the final confirmed price. Even volumes taken in early this month will be settled next month. In a situation where the final price is unknown, it is hard to cut retail prices significantly.
A person surnamed Shin, 70, who runs a station in Yongsan District, Seoul, said, "Refinery-operated stations receive supply cheaply and can lower prices quickly, but independent stations also have to cover staff wages and operating costs," adding, "Still, we're trimming prices little by little because we're mindful of customers."
Conversely, some are willing to take losses to clear inventory quickly. A person surnamed A, who runs a station in Dongjak District, Seoul, cut gasoline and diesel prices that morning by 100 won and 160 won per liter, respectively.
A said, "Even if the inventory was bought at high prices, we need to sell it quickly to receive new volumes at cheaper prices," adding, "Right now, it's better to sell fast even if we take a loss." A added, "We've been on edge because of international oil prices, but with the price ceiling setting the supply price, I feel a bit more at ease."
If the government judges that fuel prices have stabilized after two weeks, it plans to lift the petroleum price ceiling. Conversely, if the uptrend continues, such as average prices exceeding the ceiling, it will set a second ceiling.
The government also plans to implement a separate notice banning hoarding by refiners and gas stations and to continue on-site inspections.