In March, as oil prices soared due to the U.S.-Iran conflict, South Korea's four major refiners relinquished their pricing authority. Despite the opportunity to profit from the war, they chose to cooperate with government policies prioritizing price stability and public welfare.
In response to rising oil prices, the Yoon Suk Yeol administration imposed price caps on gasoline, diesel, and kerosene for the first time in nearly 30 years since the liberalization of oil prices in 1997. The refiners agreed to share the burden of losses, trusting the government's promise of post-factum financial compensation.
Seven months have passed, and during this time, the government has set the maximum oil prices 11 times, yet the refiners have not received any compensation. The Oil Price Adjustment Committee has even reached out to the Board of Audit and Inspection for assistance.
Industry sources indicate that the Ministry of Trade, Industry and Energy and the Adjustment Committee are seeking pre-consultation with the Board of Audit and Inspection before finalizing compensation for the refiners' losses. This move is seen as an effort to ensure the legitimacy of the adjustments and to mitigate post-factum accountability. Critics suggest that rather than fulfilling promises made six months ago, the government is preparing to evade responsibility amid the prolonged price cap.
The Adjustment Committee, which is setting unprecedented standards for compensation, aims to minimize the risk of disputes by seeking pre-consultation. However, the very organization tasked with establishing these standards is the Adjustment Committee itself. Despite collaboration among 20 experts in accounting, law, and the oil market, the reliance on the Board of Audit and Inspection for decision-making raises concerns.
For the four refiners, the situation is increasingly frustrating. While the market focuses on the semiconductor supercycle and Samsung Electronics' record profits, another company enjoying a historic boom is Saudi Aramco, the world's largest oil company. Thanks to high oil prices and refining margins, Aramco is vying with Samsung for the top spot in global operating profits. However, for the four refiners bound by the price cap, this success feels distant.
The government initially planned to settle the refiners' losses quarterly under the price cap system. The first settlement period, covering March 13 to June 30, was supposed to be finalized three months ago. However, the deadline for the refiners to submit their data was pushed from August to September, and even after submission, multiple requests for additional information followed. This has led to criticism that the government and the Adjustment Committee are stalling.
In response to the refiners' urgent appeals to avoid further delays, the government announced it would finalize the first settlement amount by the end of November. However, it remains uncertain whether this will be accomplished. Companies dissatisfied with the settlement amount may file objections, and the procedures for the second settlement period covering July to September have yet to begin.
This situation highlights the government's lack of preparedness in implementing the price cap. Companies are left feeling deprived of growth opportunities due to lost sales and operating profits.
Time is also a pressing issue. If the government fails to utilize the allocated reserve fund of 4.2 trillion won for loss compensation by the end of the year, it will be rendered unusable. With just over two months remaining until year-end, the urgency is palpable.
The path forward for the government and the Adjustment Committee is clear. They must ensure the first settlement payment is made within the year. Items without disputes between the government and companies should be prioritized for payment, while contentious issues can be settled later. Additionally, the criteria for acceptable margins and cost recognition must be transparently disclosed, as numbers derived from closed-door deliberations and consultations with the Board of Audit and Inspection are unlikely to gain acceptance from the market and companies.
* This article has been translated by AI.
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