Korea Threatens to Revoke Budget Gas Station Licenses Over Price Hikes

The South Korean government has taken a hardline stance against budget gas stations, threatening to revoke their business licenses if they fail to lower prices amid soaring fuel costs that have pushed average gasoline prices above 1,850 won ($1.27) per liter.

Korea National Oil Corporation (KNOC) announced Thursday that it sent text message notices to budget gas stations nationwide the previous day, titled "Request to Refrain from Excessive Price Increases."

"Gas stations that have raised prices significantly since February 28 or taken excessive margins, failing to comply with national policy, will face management measures including additional surcharges, evaluation penalties, and non-renewal of contracts," KNOC warned in the message.

Budget gas stations are a government initiative designed to provide fuel at relatively low prices. The program is currently operated by KNOC, Korea Expressway Corporation, and NongHyup Economic Holdings, which grant business rights to independent operators. KNOC signs one-year contracts with budget gas station operators and will revoke licenses for those that raise prices excessively.

As of late last year, there were 1,318 budget gas stations nationwide, accounting for 12.3% of all gas stations. Of these, 395 are independent budget gas stations managed by KNOC.

KNOC's aggressive oversight comes as surging gasoline and diesel prices have affected some budget gas stations as well. One budget gas station in Seoul was found selling regular gasoline at 1,899 won per liter, above the national average.

"We will closely monitor sales price trends," KNOC said. "We urge stations to avoid excessive price increases relative to purchase costs based on expectations of future price rises, particularly for recently acquired inventory."

Gas station operators are pushing back. The Korea Gas Station Association issued a statement Thursday saying, "The primary factor in this price increase is the rise in supply prices from refiners. Refiner supply prices jumped more than 100 won for gasoline and more than 200 won for diesel in a single day."

The association claims that when accounting for fuel taxes, credit card fees, financing costs, and operating expenses, gas stations have less than 2% margin to adjust prices.

"During periods of rapid price increases with intense competition, cost burdens vary depending on purchase timing, and some gas stations sell at a loss," the association added. "Rather than generalizing the entire gas station market as profiteering, judgments should be made carefully based on objective data and comprehensive consideration of transaction structures."