Low-priced gas station plan hits snag

By Kang Seung-woo

The government has a plan to open 1,300 low-priced gas stations as part of its effort to contain rising fuel prices.

But there is growing opposition to the idea, questioning of its effectiveness and calling it another vain move by the current administration.

The Ministry of Knowledge Economy Thursday said that the state-run Korea National Oil Corp. (KNOC) and the National Agricultural Cooperation Federation, better known as Nonghyup, will purchase fuel in bulk from oil refiners in Korea and abroad and supply it for the so-called “thrift” gas stations.

These outlets will be able to sell fuel cheaper than the current gas stations, with the average price up to 100 won less per liter, thanks to cheaper supply prices. The first low-priced gas station will open in December, with 500 to be set up next year.

The anti-inflationary action seemed to hit a snag from the beginning.

Local oil refiners balked at the proposal, citing price fairness.

“It is not fair that we offer fuel at cheaper prices to thrift gas stations, while continuing charging existing ones more,” said an industry official.

“We expect to face complaints from existing gas stations.”

Korea Gas Station Association (KOSA) President Han Jin-woo was quoted as saying: “The government’s plan is for just 10 percent of the total gas stations. Currently, service stations average a 4 percent operating margin, which means they cannot lower fuel prices anymore.”

In addition, the Korea Oil Association (KOA) criticized the KNOC’s involvement, citing its status as a government-run organization.

“The KNOC collects and monitors the trading volume and prices of oil refiners and gas stations, so its direct entry to the distribution industry may cause debate of antitrust violations,” the KOA said in its statement.

Along with the backlash from the related industries, it is doubtful if the plan can really tackle the soaring fuel prices.

First of all, the four major oil refiners, SK Innovation, GS Caltex, S-Oil and Hyundai Oilbank, are not certain to bid to be the suppliers of the low-priced gas stations.

“The plan means to press oil refiners to sell fuel cheaper although the KNOC and Nonghyup buy it in bulk. Who will voluntarily do so,” said another industry official.

Seoul and the capital area take a large portion of fuel consumption, but there will only be about 20 thrift gas stations in the area by next year, with none in Seoul.

In April, the four oil refiners lowered their fuel prices by 100 won for three months after pressure from the government.