Ruling party moves to overhaul exclusive deals between refiners and gas stations

The Minjoo Party of Korea has moved to abolish the long-standing practice of exclusive supply contracts that require small gas stations to purchase all of their fuel from a single refiner. The four major oil refiners in South Korea have argued that "lengthy discussions are needed," but the Minjoo Party plans to pursue legislation, including penalty provisions, if the companies do not indicate their acceptance by early April.
According to political sources on the 26th, the Minjoo Party has summoned GS Caltex, SK Energy, S-Oil and HD Hyundai Oilbank, the four major oil refiners in South Korea, and urged them to reach an agreement within ten days. The talks cover improving the way fuel costs are calculated, introducing a system to pre-announce prices based on cost, and shortening settlement periods for gas stations.
Jeong Jin-uk, a lawmaker on the Minjoo Party’s Euljiro Committee, briefed reporters the same day on these plans. He said, "The gas station industry has long pointed out that the relationship between refiners and gas stations is a highly unequal one, and both the government and the Minjoo Party share that view." He added, "We told the refiners that a bold concession is needed. It may be impossible to satisfy 100 percent of what the public wants, but this is a time of crisis when we must share the burden, so we will seek to reach a first-stage agreement even if they concede 50 to 60 percent."
In particular, the party is focusing on encouraging "mixed-supply contracts" that would allow small operators running gas stations under a specific refiner’s brand to sell a mix of that refiner’s fuel and fuel from other companies.
The Euljiro Committee plans to summon the four major oil refiners again on April 1 to once more ask whether they will accept the proposed changes. It is also considering writing explicit penalty clauses into law if the companies insist on maintaining the practice of forcing stations to buy their entire fuel volume from their own brand.
Regarding the refining industry, Jeong said, "This has been one of the few areas where companies have enjoyed a completely dominant position for a long time." He stressed, "We cannot resolve the power imbalance without addressing this issue. If the refining industry accepts these changes, the impact on lowering prices will be significant, so this is a problem that must be dealt with."
jiwon.song@fnnews.com Song Ji-won Reporter