Ministry, refineries differ on how to end temporary oil price cut

The government is seeking to alleviate the fallout of local oil refiners’ move to raise product prices that were temporarily lowered to help stem inflationary pressure, sources said Thursday.

The Ministry of Knowledge Economy recently held talks with local oil companies and called for a “soft landing” approach when they move to mark up gasoline and diesel fuel after July 6, they said.

In April, SK Innovation Co., GS Caltex Co., S-Oil Corp. and Hyundai Oilbank Co. all lowered prices by 100 won per liter as the country’s consumer prices soared 4.7 percent on-year the month before.

At that time, Seoul was moving to curb consumer price hikes since the increase was far higher than the 3 percent gain that the government wanted to maintain for 2011, and caused policymakers to urge oil companies to do their part to alleviate economic difficulties.

“In the recent talks, the ministry asked companies if they could keep prices low a little bit longer or raise prices slowly to reduce the impact on consumers,” said an oil company executive, who declined to be identified.

Despite the request, most oil companies expressed reservations about extending the cuts, especially since consumer prices rose at the slower pace of 4.1 percent in May, he added.

Related to the meeting between policymakers and oil company representatives, Toh Kyung-hwan, head of the ministry’s energy industry office, stressed that the government officially respects all market decisions and extending price cuts should be determined solely by businesses.

The ministry, which is in charge of the country’s industrial and energy policies, said it is reviewing the possibility of lowering the tariff quota on crude imports from the present 3 percent to zero, or cutting taxes levied on fuel products that account for nearly half of consumer prices.

Such measures can reduce consumer prices, but they will hurt state earnings and must be implemented after careful consideration. 

(Yonhap News)