South Korea govt. warns on fuel price hike

July 19, 2011 at 11:46 AM
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SEOUL, July 19 (UPI) -- Rising fuel prices in South Korea have aroused public anger, with the government promising to investigate price surges.

Since a voluntary reduction of gasoline and diesel prices by 9 cents per liter by South Korea's four major refineries, begun in April, lapsed July 6, gasoline and diesel prices have been rising nearly every day.

"Refineries and gas stations are currently pointing fingers at each other (for the price increases), so the government will sample 500 gas stations to see who is right," South Korean Knowledge Economy Minister Choi Joong-kyung was quoted as saying in a Yonhap report.

Choi said that the government's survey of 500 gas stations is a sampling of the country's 10,000 service stations and is designed to see if they are generating excessive profits. A second element in the survey will attempt to determine if the outlets are selling counterfeit gasoline or gasoline substitutes in violation of the law.

Choi added that the refineries' price rises shouldn't exceed the 100 won -- 9 U.S. cents -- per liter discount that was offered for 3-month period.

Energy prices are a sensitive topic in energy-poor South Korea, which has to import nearly all of its energy. South Korea is the world's largest importer of liquefied natural gas and Russia is building a multi-billion-dollar LNG plant in Sakhalin specifically to supply the South Korean market.

A week ago South Korean Minister of Strategy and Finance Bahk Jae-wan promised that gasoline prices wouldn't go to more than $1.88 per liter -- about $7.14 per gallon -- but after the end of the voluntary price freeze the market sent gas prices soaring within days.

Fighting against government accusations of possible price gouging, fuel station owners say oil companies are lying by reporting false supply price figures to the Korea National Oil Corporation. Rather than giving them a supply discount, gas station operators say that the country's four major refiners instead raised prices, which the gas stations passed to consumers at the pump.

Choi also addressed the issue of electricity prices, saying there is no firm date set for increasing electricity prices or a final decision on how much prices will rise.

"Rather than saying when or how the price will be raised, I will just say the move will focus on rationalizing the electricity price system in the long term," he said.

The South Korean government subsidizes electricity prices, with prices reflecting about 94 percent of production costs.

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