S-Oil says compensation criteria for losses under oil price cap still undecided

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[The Financial News] Bang Joo-wan, Chief Financial Officer (CFO) of S-Oil Corporation, said during the company’s first-quarter earnings conference call on the 11th that, regarding government compensation for losses under the oil price cap system, "specific standards for calculating losses have not yet been established, so it is difficult at this point to say how large the losses will be or when compensation will be paid."
Bang said, "Since the oil price cap was introduced, the company has not been able to link domestic selling prices to international oil prices, resulting in significant losses compared with normal pricing."
The government has been implementing the oil price cap system since March 13, setting a ceiling on refiners’ fuel station supply prices every two weeks. After raising the cap by 210 won per liter for each fuel type in the second adjustment, it has kept the same level since then. The government has said it will later compensate refiners for losses caused by their inability to reflect higher global oil prices in selling prices.
To that end, the government allocated 420 billion won in reserve funds, assuming the cap would remain in place for six months. However, the industry estimates that cumulative losses in the refining sector have already reached the 300 billion won range since the cap took effect.
Bang explained, "The timing of profit and loss recognition will be when the government’s compensation amount is officially confirmed and notified, in accordance with accounting principles."
solidkjy@fnnews.com Gu Ja-yun Reporter