South Korea to end import tax incentive for gasoline and diesel fuel

South Korea will end a tax incentive given to gasoline and diesel fuel imports starting July.
Currently, diesel fuel and gasoline imported for trade on the online Korea Exchange is exempted from a 3% tariff to make them competitive with local products. South Korea’s Energy Ministry said in a statement that this tax benefit would end in July and that domestic oil refiners are planning to join the Korea Exchange from the second half of this year.
The Korea Exchange was launched last year in an effort to tame record-high fuel prices, as well as to increase price transparency and to reduce the influence of its four refiners — Hyundai Oilbank, GS Caltex, SK Energy and S-Oil—through more competition from oil traders.
Diesel volumes traded on the Korea Exchange are now equal to around 10% of South Korea’s diesel fuel consumption, and about 1,300 entities participate in the market, the exchange said.
The latest move by the South Korean government is expected to encourage refineries to shift some diesel fuel from export markets to the domestic market, which could help push up Asian margins on diesel fuel during June and July, the typical months of peak demand from Saudi Arabia, one of its largest export customers.
Saudi Arabia’s demand for diesel fuel imports for power generation is expected to increase as temperatures soar from June, and its demand for diesel fuel as a transport fuel could increase during the Muslim festival of Eid, which culminates in August.
South Korea’s first-quarter diesel fuel exports rose more than 10% year-on-year as cargoes priced out of the local market were shipped overseas.