Korea’s plan to launch discount gas stations hit a fresh snag as the government has again failed to strike a bargain with refiners over the prices of petrol supplies last week.
The project was initiated in July as a key mechanism for the government’s battle against sky high fuel prices, and calls for converting about 10 percent of the country’s gas stations, about 1,300 outlets, into discount vendors by 2015.
The Korea National Oil Corp. and Nonghyup, a state-funded agricultural bank, aim to cut fuel prices by up to 100 won (9 cents) per liter by buying petrol in bulk from refiners and redistributing it to the vendors.
The deadline for an auction was set initially for Nov. 15 but pushed back after all three bidders ― SK Energy, GS Caltex and S-Oil ― set prices higher than the government wanted. They failed to close the gap in the second round on Dec. 8.
“The government is trying to bring in supplies for low prices and refiners want to sell it at higher margins,” an official at the Ministry of Knowledge Economy said.
“We had not expected to see a successful bid because under the rules they can’t make changes to bid prices or conditions.”
To remedy the drawback, the ministry said it is negotiating a deal with all four major refiners, including Hyundai Oilbank, while weighing other options such as imports.
The government targets to open a new gas station within this year. But the outlook remains bleak despite its ongoing push.
Discount gas stations are the latest in a string of government measures to dismantle the dominance of the top four refiners, which account for more than 90 percent of the nation’s petrol supplies.
The four sparked criticism early this year for raking in huge profits at the expense of consumers and adding to inflationary pressure. In May, the four firms were slapped with fines of 434.8 billion won by the antitrust regulator for collusion in managing gas stations.
In Korea, which depends on imports for almost all its oil needs, gas prices have gone beyond 2,300 won per liter in some regions with its benchmark Dubai crude hovering above $100 a barrel throughout this year.
However, refiners and owners of gas stations vented fury at the government push for retail price cuts, petrol imports and non-franchise and self-service stations.
The Korea Oil Station Association, which represents station operators, rallied protest against the government’s plans, saying their business has been reeling in the face of heated competition and tightening control over prices in the saturated market.
“The profit margin of gas stations is not high and the latest proposal for discount stations can only be seen as a move to exert control over the market,” an official at the organization said.
By Shin Hyon-hee (
heeshin@heraldcorp.com)
