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Photo courtesy of Yonhap News |
[Alpha Biz= Ellie Kim] The South Korean government is set to begin formal procedures to compensate oil refiners for losses incurred under the country’s fuel price cap policy, in a move that could set a precedent for future energy price control measures.
According to government sources on June 9, the Ministry of Trade, Industry and Energy plans to finalize a notification outlining compensation criteria within this month and establish a cap settlement committee to calculate losses suffered by refiners.
The ministry is currently conducting a final review of the notification draft and settlement procedures, having already gathered input from the country’s four major refiners — SK Innovation, GS Caltex, HD Hyundai Oilbank, and S-Oil.
The ministry had initially aimed to introduce the notification and launch the committee last month, but the timeline was delayed to June due to extended reviews of detailed criteria.
“There are no major points of contention, but we are continuing to refine the wording and details through consultations,” a ministry official said, adding that the process is expected to be completed within the month.
This marks the first official settlement process since the government implemented the fuel price cap policy in March. Compensation will be carried out on a quarterly basis, with refiners submitting their estimated losses, which will then be reviewed and verified by the committee before final amounts are determined.
A key issue in the process is the scope of recognized losses. Industry estimates suggest total losses could reach around 4 trillion won ($XX billion). However, the final compensation amount will vary significantly depending on how factors such as global oil price fluctuations, inventory valuation gains or losses, and declining refining margins are treated.
Refiners argue that compensation should cover not only the gap between crude import costs and retail prices, but also inventory-related losses and reduced refining margins. The ministry, however, has maintained its position that compensation should be based primarily on cost-related factors.
Alphabiz Ellie Kim 인턴기자(press@alphabiz.co.kr)
