Korea is drawing up measures to induce price cuts by oil refineries, the nation’s top economic policymaker said Tuesday, expressing suspicion that they are not setting prices for domestic consumers in a transparent manner.
The remarks by Finance Minister Yoon Jeung-hyun are the latest in his series of strong words against the nation’s oil refinery industry. He has been accusing the industry of keeping oil supply prices higher for customers here compared to their import prices of international crude.
“Refineries are not being transparent in how they set the prices for the oil supply,” Yoon said during his visit to a local gas station in Seoul. “The government is currently drawing up strong measures against the oil refinery industry (in connection with its price-setting process).”
The government launched a task force last month to look into the refinery and telecommunication industries, which are frequently blamed for their higher product and service prices.
Minister of Finance and Strategy Yoon Jeung-hyun at a self-service gas station in Seoul on Tuesday. (Ahn Hoon/The Korea Herald)
The move is in line with the government’s all-out efforts to tame inflation as concerns are growing that rising prices could emerge as a heavy drag on the overall economic recovery.
A steep rise in oil prices, however, is aggravating the anti-inflation efforts. The price recently surpassed $100 per barrel amid deepening political unrest in North African and Middle Eastern countries. Concerns over possible supply disruptions sent gasoline prices at pumps here to the highest level in years.
Some experts have asked the government to reduce taxes imposed on oil products but the government appears to be reluctant to lower the taxes for fear that its impact would be short-lived and a decline in tax revenues could worsen its fiscal soundness.
Against this backdrop, the government is zeroing in on large oil refineries amid growing claims that they are keeping oil prices unjustly high through what the government deems opaque distribution and price-setting processes.
“It is a general consensus in the market that there have been problems caused by monopolistic market structure (in the oil refinery industry). The government also shares that view,” Yoon said.
“Our task force is currently exploring diverse measures with regard to distribution and price setting for oil,” he said. “We will come up with ways to resolve the problems stemming from such monopolistic distribution structure by the end of this month.”