Korea eyes ‘alternative’ gas stations in fight to reduce inflation

The government on Thursday outlined plans to transform about 10 percent of the country’s gas stations into “alternative” vendors to supply petroleum products as part of its fight against runaway fuel prices.

Seeking to lessen the dominance of the country’s four refiners and stimulate competition, the government has devised measures that includ multiplying non-franchise and self-service stations.

Through the plan, ministry officials expect to cut gas prices by around 100 won (9 cents) per liter by having state-run Korea National Oil Corp. and Nonghyup, Korea’s largest agricultural bank, purchase petrol in bulk from refiners at home and abroad and distribute to alternative stations.

“The government has concluded that an oligopoly by the four refiners restricts competition in the local market,” the ministry said in a statement.

“The new concept of policy will maximize consumer benefits as it invigorates activities of suppliers and sellers.”

The ministry aims to boost the envisioned stores for 10 percent of the country’s entire network by 2015.

To that end, it plans to court charities, social enterprises and independent entrepreneurs, on top of the incumbent owners of non-franchise stations with no record of fuel adulteration, to operate the stores, and provide funds of up to 23 million won for renovating facilities.

Currently, SK Innovation, GS Caltex, S-Oil and Hyundai Oilbank control Korea’s petrol supplies. With Nonghyup, their combined stake reaches 94 percent in the domestic market as of April.

The major refiners drew much criticism early this year for raking in huge profits at the expense of consumers and heaping up inflationary pressure. In May, the four firms were slapped with fines of 434.8 billion won by the Fair Trade Commission for collusion in managing gas stations.

President Lee Myung-bak joined the push later on, prompting refineries to lower price tags at the stations by 100 won per liter between April and June. But costs rebounded again afterward and inflation persisted at around 4 percent.

Operators of local gas stations vented fury in August after reports that the government is mulling importing petroleum products from Japan, which the ministry denied. They claimed their business has been reeling in the face of cutthroat competition and the temporary price cuts.

“It appears the government is trying every option it has, but nothing is really working out,” an industry official told The Korea Herald.

“Adopting Japanese gasoline by lowering our own environmental standards is reverse discrimination against Korean companies.”

By Shin Hyon-hee (heeshin@heraldcorp.com)