The Korea Herald


End of fuel discount raises tension among refiners

By 최희석

Published : July 5, 2011 - 19:20

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A banner advertising a 100-won discount per liter on fuel is seen at a gas station in Seoul on Sunday, three days before the scheduled end of the discount period. (Yonhap News) A banner advertising a 100-won discount per liter on fuel is seen at a gas station in Seoul on Sunday, three days before the scheduled end of the discount period. (Yonhap News)

Tension among refiners is flaring up again with the government pressuring them to bring fuel prices back to normal rates in stages.

Under pressure from the government, local refiners lowered the pump price of motor fuel by 100 won (9 cents) on April 7.

Although the refiners have set the deadline to end the discount prices for July 7 from the outset, hard pressed to control inflation, the government has been talking of raising prices back to normal levels in stages.

While the industry appeared reluctant to take such measures, the country’s second largest refiner GS Caltex took the lead in following the government’s suggestions.

“The company will bring prices back to pre-discount levels in stages. But at the moment we can’t say how the process of raising prices will be carried out, but we are trying to minimize the impact on the consumers,” a GS Caltex official said. He added that the decision to gradually bring prices back up to previous levels was made “independently of the government,” and that the Ministry of Knowledge Economy did not pressure the company into adopting such policies.

“Details about the plan can’t be disclosed as it can be considered price fixing if we openly discuss it, but it is aimed at minimizing the impact on the consumer.”

While industry officials declined to comment about pressure from the government, the Minister of Knowledge Economy has all but publicly called for refiners to bring prices back to normal levels.

At a recent meeting with the press, Minister of Knowledge Economy Choi Joong-kyung said it would be desirable for refiners to go about raising prices with the same “beautiful mindset” seen in introducing the cut, adding that he hoped “refiners will be burdened by my comments.”

While GS Caltex may be acting in the interests of consumers and to appease the authorities, developments at the country’s No. 2 refiner may not be sitting so well with other refiners, relations between which have deteriorated in recent months over price cuts and Fair Trade Commission investigations.

Other refiners have yet to announce any plans regarding the issue, saying only that they will watch market developments.

While GS Caltex is the only refiner to officially announce its intentions to follow the government’s suggestions, those in the industry say that other will have little choice but to follow with similar measures.

“The case is that gas stations often follow what other stations are doing, and if one refiner takes a graded approach, others are likely to follow,” an industry official said declining to be named.

The FTC has conducted two major investigations into the country’s fuel industry since 2009, the most recent of which resulted in the FTC handing out nearly 435 billion won in fines to six concerned companies in late May.

In the 2009 investigation, SK Energy informed the FTC of cartelization for which it was given exemption from fines. In the more recent investigation, GS Caltex was the first to report irregularities to the watchdog, which those in the industry say was motivated by SK Energy’s informing the commission in 2009.

By Choi He-suk (