The Ministry of Finance of South Korea, which had approved a 20% reduction in taxes on gasoline, diesel and liquefied petroleum gas (LPG) for a 6-month period in November 2021, has decided to extend the 20% tax cut on oil products by another 3 months, i.e., until late July 2022, in an attempt to lower the impact of surging global energy prices. It will also extend the 0% tariff on LNG until the end of July 2022 and will consider expending the extent of fuel tax cuts. Taxes currently account for 55% of the gasoline price, 46% of the diesel price and 30% of the butane price.
South Korea will also seek to directly import crude oil from overseas oil fields in which the state-owned oil company KNOC owns a stake (around 30 mbl of crude oil), in order to avoid oil supply disruption. This measure is expected to help lower feedstock procurement costs for local refiners and retail sales prices.
Finally, the government has announced that it was ready to release more oil from its strategic petroleum reserves, though without specifying the volumes and grades of crude oil to be released. South Korea currently holds 97 mbl (83 mbl of crude oil and 14 mbl of oil products) in its strategic reserves, corresponding to 106 days of domestic demand.
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