South Korea plans to extend the fuel tax cut due to end in April to reduce the fuel burden on the public amid soaring international oil prices due to escalating tensions between Russia and Ukraine.
On Wednesday, Korea’s Ministry of Commerce, Industry and Energy held a meeting with the Korea Petroleum Association, four local refining companies, the Korea Institute of Energy Economics and Korea National Oil. Corporation to monitor the state of the country’s fuel supply.
During the meeting, Vice Energy Minister Park Ki-young said the ministry will continue discussions with other government departments such as the Ministry of Economy and Finance to come up with measures, including the extension of the fuel tax reduction which ends in April if international oil prices continue to rise to ease the burden on the population.
The Korean government lowered taxes on gasoline, diesel and butane LPG in November last year to rein in inflation amid soaring oil prices. The temporary six-month program ends in April.
The government is also exploring an option to release national oil reserves if private oil reserves fall below the adequate level and offering tax incentives.
The price of Brent crude hit $92.69 a barrel on Tuesday, up 34.5% from two months ago.
Global think tanks, including JP Morgan, have predicted oil prices could hit $100 a barrel, which could bode ill for the Korean economy.
The Hyundai Research Institute said in a report on Tuesday that Korea’s economic growth would be slowed by 0.3 percentage points if oil prices rose above $100 a barrel and consumer prices increased by 1.1. percentage point.
The report notes that Korea is the most dependent on crude oil among the 37 OECD countries and that a rise in oil prices would worsen the competitiveness of the country’s main industries such as refinery, steel and chemicals. Korea’s economic growth rate could fall another 0.4 percentage points if oil prices hit $120 a barrel.
By Ahn Byung-joon and Lee Eun-joo
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