Finance Ministry Considers Oil Tax Cut

Korean oil refineries, which began to set diesel prices higher than that of gasoline last week, are widening the price gap even more this week. As a response, the government is reviewing countermeasures, including cutting the oil tax further.

The oil refinery industry said yesterday that GS Caltex began to provide diesel oil for a price 60-won higher than that of gasoline at midnight Wednesday. That means the price gap doubled from last week’s 30 won.

The price gap at S-Oil also increased to 60 won on Wednesday from 10 won last week, while SK Energy is also planning to expand the gap from 25 won to 40 won this week. Hyundai Oilbank, which supplied gasoline and diesel oil for similar prices, is also likely to raise the diesel price 30 to 35 won higher than gasoline price.

Meanwhile, amid criticism that the government is not doing enough to tackle the oil price hike, the Ministry of Strategy and Finance said that it would review its countermeasures against rising oil prices, including the oil tax cut. It is the first time that the ministry mentioned the possibility of further tax cuts in relation to the recent oil hike.

Under these circumstances, experts predict that taxes on petroleum products, diesel in particular, could be reduced to a degree.

The Korea Automobile Manufacturers Association also submitted its petition for tax cuts for diesel to the Finance Ministry and the Knowledge Economy Ministry.

The association argued in the petition, “As the consumer price for diesel rose up to 98 percent of the gasoline price in May, the price proportion of oil products that government released has been greatly distorted. This burdens consumers and disrupts industrial activities.”