Diesel Fuel Prices Hit Record High in South Korea

Seoul January 25, 2004: Kim Sung-jin writing for the Korea Times reported that skyrocketing international crude oil prices have pushed prices on domestic petroleum products for 15 straight weeks, driving the average diesel fuel price to a record high.

The state-run Korea National Oil Corp. (KNOC) said it polled 556 oil filling stations and found that the average gasoline price in the country rose by 2.5 won to 1,325.48 won per liter on Jan. 17, rising for 15 successive weeks since the second week of last October.

The weekly domestic gasoline price drew near its historic high of 1,353.4 won per liter marked in the second week of March last year. The price of diesel oil has risen by 2.54 won on average and reached its peak of 831.6 won per liter, renewing the previous high of 812.97 won posted right before the war in Iraq.

``The hike is attributed to the sudden decision by the Organization of Petroleum Exporting Countries (OPEC) last September to cut oil production as well as the political instability in post-war Iraq, constant rise in local energy demand and the steep rise in international crude oil prices,¡¯¡¯ said a KNOC spokesman.

``The current high price trend is forecast to carry on to next month," he added.

To cushion the shock from the fluctuation of the international crude oil prices, the Ministry of Commerce, Industry and Energy (MOCIE) said last Friday that it will increase the oil reserves from 71.8 million barrels to 81.4 million barrels. The government has expanded the oil price shock-absorbing budget from 506 billion won last year to 531.3 billion won in 2004.

Given the local oil demand, 81.4 million barrels can meet 55 days of domestic oil consumption, 6.2 days more than the previous oil reserve volume. MOCIE will spend 95.7 billion won on securing the additional oil reserves.

The floating average of Dubai cash crude price, which stood at $23.81 per barrel back in 2002 continued to draw an up curve, soaring to $26.79 in 2003 and $29.01 between Jan. 1-21 this year. Especially, the price has surged to $29.15 per barrel last Tuesday and hiked further to $29.28 on Wednesday.

Dubai is one of the few Middle Eastern crudes that are freely traded and used as market benchmark for crudes shipped from the Persian Gulf. Dubai crude accounts for more than 70 percent of South Korea¡¯s crude oil imports. Korea is 100 percent dependent on foreign imports for its domestic petroleum consumption.