Special Envoys to Saudi Arabia, Oman and Algeria; Post-Settlement System for Gas Stations to Be Abolished in Principle

The Democratic Party of Korea (DPK) and the government decided on the 6th to begin full-scale consultations with oil-producing countries that have alternative import routes, such as the Kingdom of Saudi Arabia (KSA), Oman and Algeria, in order to secure substitute crude oil supplies amid a situation where the Strait of Hormuz has been blocked by the Middle East war. They also agreed to move toward abolishing the post-settlement system between oil refining companies and gas stations.
On the same day, the DPK and the government held a plenary meeting of the Special Committee on Economic Response to the Middle East War at the National Assembly of the Republic of Korea. The main agenda was a package of measures to stabilize the supply of petroleum products, with a focus on these points.
Ahn Do-geol, who serves as secretary of the special committee, said, "What the government is currently doing is securing crude oil volumes through consultations with oil-producing countries that have alternative import routes," adding, "Securing substitute crude oil volumes is the most urgent task."
The DPK and the government have designated three target countries—KSA, Oman and Algeria—and plan to step up diplomatic efforts led by the Ministry of Foreign Affairs of the Republic of Korea, including dispatching special envoys. The Ministry of Trade, Industry and Resources is pushing to deploy a total of five Korean-flagged vessels to the Red Sea along alternative routes. The government also plans to pursue "swaps" between state-held strategic oil reserves and crude oil secured by private oil refining companies, in order to help those companies obtain as much substitute crude as possible through third countries.
Supply issues for petroleum-based products such as Naphtha and plastics were also placed on the table. At present, the DPK and the government are prioritizing and managing demand for petroleum products in essential areas, such as intravenous infusion bags in the healthcare sector, through administrative measures. They indicated that if supply instability for essential items worsens, they may consider supply-control measures such as export restrictions on products like Naphtha.
The DPK and the government also disclosed the results of social dialogue between oil refining companies and the gas station industry. The post-settlement system, which has been identified as a main reason for shifting the burden of oil prices onto gas stations, will effectively be phased out by shortening the settlement cycle from the current one month to one week. Under the post-settlement system, an oil refining company first supplies petroleum products to a gas station and then settles the payment after a certain period based on international benchmark prices. Gas station operators have long complained that they are forced to purchase fuel without knowing the exact payment amount for the supplied volume.
The practice of exclusive dealing will also be eased, with the current requirement to purchase 100% of fuel from a single supplier to be lowered to around 60%, thereby giving individual gas stations greater freedom to choose where they buy petroleum products. As deliberations on the supplementary budget are under way, the DPK and the government also decided to consider increasing funds for affected export companies. Currently, 470 billion won has been allocated to cover about 50% of the price difference arising from securing substitute Naphtha supplies, but industry representatives have urged the DPK and the government to raise the support level to around 80%.
gowell@fnnews.com Hyung-gu Kim Reporter