Diesel prices have overtaken gasoline at gas stations across South Korea for the first time in three years as military conflict between the U.S.-Israel alliance and Iran spreads throughout the Middle East, driving domestic petroleum prices sharply higher.
As of 4:30 p.m. on the 5th, the national average gasoline price stood at 1,834.32 won ($1.33) per liter, up 56.84 won (3.19%) from the previous day, according to Opinet, the Korea National Oil Corporation's oil price information system. Diesel averaged 1,830.33 won per liter, surging 101.56 won (5.87%) to nearly match gasoline prices.
Diesel Exceeds Gasoline in 9 of 17 Regions
The price reversal has already occurred in many areas. Seoul's average gasoline price was 1,889 won per liter while diesel reached 1,895 won. In Gyeonggi Province, gasoline stood at 1,838 won compared to 1,847 won for diesel. Incheon showed diesel at 1,872 won per liter, 34 won higher than gasoline at 1,834 won.
Nine of the nation's 17 metropolitan governments recorded higher diesel prices: Seoul, Incheon, Daegu, Ulsan, Daejeon, Gyeonggi, South Gyeongsang, Sejong, and Jeju. Jeju saw diesel surpass gasoline the previous day.
"Considering the overall rate of increase, national average diesel prices will soon exceed gasoline," an industry official said.
Diesel Commands Premium in Global Markets
Experts note that diesel is inherently more expensive than gasoline in international markets. During crude oil refining, gasoline is extracted at 30-140°C while diesel requires 250-350°C, making gasoline easier to produce. Yet diesel demand is higher globally, as diesel vehicles are common in Europe and commercial vehicles and industrial equipment run on diesel. This makes diesel prices more volatile during global supply disruptions.
According to KNOC data, international gasoline traded at $79.64 per barrel on September 27, just before the Iran crisis erupted, while diesel stood at $92.90. After hostilities began, gasoline rose 25.14% to $99.66 per barrel by the 4th, but diesel soared 56.22% to $145.13. Kerosene jumped 2.5 times from $93.55 to $231.41 during the same period.
"Unexpected supply concerns appear to have triggered hoarding demand," said an industry source familiar with refining operations. "While East Asian countries import crude oil to produce various petroleum products domestically, Europe imports significant quantities of finished petroleum products from the Middle East, making it more sensitive to a potential Strait of Hormuz closure."
Fuel Tax Buffer Erodes Rapidly
Diesel has traditionally been cheaper at Korean pumps despite higher international prices due to fuel tax policy. The government imposes higher taxes on gasoline to discourage passenger vehicle consumption while keeping diesel taxes lower to support commercial vehicles and industrial users.
Currently, fuel taxes on gasoline total 763 won per liter versus 523 won for diesel—a 240-won gap that previously offset the international wholesale price difference, according to the Ministry of Economy and Finance.
However, rising international prices have neutralized this buffer. Since fuel taxes are fixed amounts per liter rather than percentages, their effective rate declines as pre-tax prices rise. The sharp spike in international diesel wholesale prices has now completely overwhelmed the tax differential.
"International oil prices typically take one to two weeks to reflect in domestic retail prices," an industry official said. "International petroleum product prices had been rising this year, so gasoline and kerosene were already expected to increase slightly this week. Geopolitical risks have amplified those gains."
A similar phenomenon occurred in 2022 when the Russia-Ukraine war broke out. The price reversal happened more easily then because the fuel tax gap between gasoline and diesel was smaller. According to KNOC, the last time diesel prices exceeded gasoline nationwide was February 22, 2023.
