By Kim Da-ye
An online open market for gasoline and other petroleum-derived fuels is expected to begin this year, sources at the government and Korea Exchange (KRX) said Friday.
This new market will encourage bidding by consumers — in this case, gas stations — to determine prices, they said.
“Because the market decides the price, there won’t be debates over whether oil prices are too high. And the government would no longer need to ask oil companies to cut prices,” a KRX official said.
Currently, most gas stations are affiliated with one of four refiners — SK Innovation, GS Caltex, S-Oil and Hyundai Oilbank — and depend on them for their supplies, but the new market is expected to break up this oligarchy and eventually lead to the opening of a futures market, the official said.
The KRX, which was assigned to set up such a trading system, formed a task force, and an official said that it has progressed on schedule and the market is likely to open by the end of the year.
The players in this market include oil companies, importers and wholesalers as well as gas stations.
Because it is a spot market where actual petroleum is traded, those speculative investments won’t be able to trade there. Instead, the oil price, determined by supply and demand, will be made public.
The stock exchange won’t reveal details of the process including the negotiations with oil companies and gas stations.
The major hurdle in setting up the online market is the pressure from large oil companies, as they do not want to lose their pricing power. The government is mulling over giving participants incentives including corporate and income tax cuts.
A task force found last April that the prices set by oil companies moved differently from international oil prices between January 2009 and February this year. The difference between those prices includes distribution costs and profits of oil firms, and more competition could reduce that, the government said in a statement.
In May, the country’s four oil refiners were fined 434.8 billion won after the Fair Trade Commission found them guilty of anti-competitive practices to keep prices high.
If the online petroleum market prospers, the KRX plans to create petroleum futures that are linked to oil prices on the market. Ordinary investors including individuals will be able to invest in the financial products.
The Seoul bourse has already created gold and pork futures, and last September launched mini-gold futures as a stepping stone for a spot gold market.
It plans to create a comprehensive commodities exchange in the not-so-distant future, adding crude oil, petroleum and agricultural products to the portfolio.