Game of Truth Underlies Gas Prices
By Ryu Jin
Staff Reporter
South Korean oil refiners are the subject of grievances of local motorists amid the recent ``blame game’’ with the government over skyrocketing gasoline prices, as they were found to have been pumping up prices.
Oil companies make public the factory prices of various oil products through the Korea National Oil Corporation (KNOC) every week. But they acknowledged on Wednesday that they have inflated prices for more profits.
In recent weeks, the average gas price reached a 10-month high of 1,700 won per liter, largely affected by soaring crude oil prices. In particular, the gas price in Seoul is on the verge of surpassing 1,800 won this week.
Pump prices at local gas stations are much higher compared with crude oil prices because of the country’s peculiar pricing structure. While the ex-refinery price accounts for only 39 percent of the total, some 57 percent is composed of various taxes.
As calls for tax cuts have been rising, the government said in a press release on Monday that the oil companies have seen a 59-percent hike in the margin of profit while oil-related taxes increased only 1.2 percent.
On Wednesday, the companies argued that the government’s figures were flawed since there was a discrepancy of about 30-60 won (3-6 cents) per liter between actual refinery prices and the figures made public, an acknowledgement of the so-called back margins practice.
Back margins, through which the actual refinery prices are inflated, have been one of the reasons oil refiners provided fuel to local gas stations at relatively higher prices.
The practice emerged as one of the hottest issues in the National Assembly’s government interpellation session last year despite the oil companies’ denial.
Rep. Chin Soo-hee of the main opposition Grand National Party (GNP) said the country’s five oil refiners have presented false refinery prices of their products, thereby causing an additional burden of 19 trillion won ($20 billion) to consumers over the past decade since the liberalization of oil prices in 1997.
The companies denied such allegations at that time. But they now admit that such a practice was an ``inevitable choice’’ to counter the soaring international oil prices, showing that the prices they publicize are only ``untrustworthy’’ figures.
With the game of truth continuing, the government is also criticized for its high tax rates. Another GNP lawmaker Park Jae-wan submitted a bill cutting various taxes levied on oil products by 10 percent.
Government officials argue the tax cuts would cause over-consumption in the country, which depends heavily on oil imports. But critics said the government is opposed to the bill because it might bring about a decrease of some 2 trillion won in tax revenue a year.