The Korea Herald


Spot oil bourse draws tepid support

By Shin Hyon-hee

Published : April 12, 2012 - 19:50

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Korea’s oil spot market hit a snag just two weeks after its launch as refiners, traders and vendors appear lukewarm about the electronic bourse aimed at boosting transparency and competition in the local petrol market.

Since March 30, a mere 10 transactions have been at the Korea Exchange, the completed country’s bourse operator, with trading volumes staying at 300,000 liters. Only 120,000 liters of gasoline was sold via four deals, which were initiated by importers.

The trading scheme is the latest in a string of government measures to dismantle a complex web of supply chains here and contain price spikes at pumps while better coping with price swings in the international market.

Four major refiners and nearly 200 traders, retail agents and gas stations were invited to participate but most of them remain reluctant, chiefly due to a low yield.

“(The bourse) clearly gives us a new sales channel but we are yet to feel the need for participation,” said an official at a refiner, declining to be named due to the sensitivity of the issue.

Another industry official said, “We’ve long been operating under the current supply structure, not to mention the trading system would not generate big profits for us.”

To drum up participation, the government offers a tax break of up to 6 won per liter and is seeking to allow sales of mixed petrol products regardless of refinery.

But refiners, who have been grappling with thinning profit margins and political pressure, are seemingly waiting to see how the wind blows. Their wholesale and franchise partners are hence naturally forced out from the market, observers say.

“Participation should be low at the beginning of the month because retailers and stations have already secured a supply,” said an official at the KRX.

“Trading volumes will grow after the middle ten days of the month when they scramble to stockpile more gas.”

By Shin Hyon-hee (