Soaring diesel prices are of concern as they can burden the lives of ordinary people, including small business owners, as well as entire industries due to logistical issues. The reason for such an increase is a problem with the supply of Russian diesel, which accounted for more than half of the amount of imports from South Korea, due to the situation in Ukraine. As industrial activities slowed due to COVID-19, Europe cut diesel production last year and finds itself with few stocks. If the situation in Ukraine continues, diesel prices will continue to last for some time.
The direct damage is concentrated on ordinary people, such as drivers of freight vehicles, small business owners, farmers and fishermen, who use diesel to make a living. According to the freight industry, oil expenses have increased to an average of 2.5 million won per month depending on the volume of freight. With oil expenses accounting for more than 30% of average transportation costs, they are being pushed into a situation where they can neither stop working nor continue. The fuel tax cut, which has been extended until July, is not very helpful as it is tied to the fuel subsidies received by freight drivers, which means their subsidies have also been reduced.
Industry is calling for the reinstatement of fuel tax subsidies that were removed in 2009, but the government is in a dilemma as it opposes the decarbonization initiative and has equity concerns. However, now is not the time for the government to stand idly by. One option to consider is to further reduce the petroleum tax, but the offsetting effect of reducing fuel subsidies must be taken into account. Measures to temporarily provide practical benefits for the use of ordinary people should be proposed. In addition, the petroleum taxation system should be reviewed by assessing the impact of diesel prices on overall industrial competitiveness.