(Maekyung DB)

Oil prices are going down from May… Gasoline 83 won, diesel 58 won with a 30% cut in fuel tax↓

(Maekyung DB)

From May 1, the extent of the fuel tax cut is expected to increase from 20% to 30%.

According to the Ministry of Strategy and Finance, the government will expand the 20% reduction in fuel tax, which has been in effect since mid-November last year, to 30%, the highest level ever, from May 1. The implementation period is 3 months, until July of next year. As a result, the fuel tax (including 10% VAT) on gasoline is expected to decrease from 656 won per liter to 573 won per liter. The tax on diesel will be lowered from 465 won to 407 won, and for LPG butane from 163 won to 142 won. Assuming that a consumer uses a gasoline vehicle with a fuel efficiency of 10 km per liter for 40 km per liter every day, it is equivalent to saving about 10,000 won per month.

1st Vice Minister of the Ministry of Strategy and Finance Lee Won-won said, “In order for consumers to feel the fuel tax cut quickly, through cooperation with industry and institutions, gas stations directly operated by refiners plan to immediately reflect the additional cut from the day the cut is implemented.”

Previously, the government applied a 20% cut in fuel tax as a measure against high oil prices from November 12 last year. The temporary cut was originally scheduled to expire on April 30, but after the Russian invasion of Ukraine, international oil prices soared to over $100, and the government decided to extend the oil tax cut by three months. The extent of the cut is also the largest ever at 30%, up 10% from the previous 20%.

Before the fuel tax cut was implemented, the fuel tax per liter (including 10% value-added tax) was 820 won for gasoline, 581 won for diesel, and 203 won for LPG butane. If the fuel tax cut is reflected, gasoline is expected to be cut by 83 won per liter, diesel by 58 won, and LPG butane by 21 won per liter. However, this figure assumes that the tax rate cut is 100% reflected in oil prices. If the fuel tax cut is not fully reflected in the distribution process, the extent of the cut will be lower.

Even if the extent of the fuel tax cut is expanded from May 1, it is expected that it will take one to two weeks for the consumer selling price to fall. This is because it takes time to deplete gas station inventory. SK Energy, GS Caltex, S-Oil, and Hyundai Oilbank, the four domestic oil refineries, decided to take some losses and immediately reflect the additional fuel tax cuts at 760 directly-managed gas stations across the country from May 1.

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