South Korea’s gasoline demand in Jan marks biggest rise in more than 5 years
South Korea’s demand of gasoline in January marked the sharpest increase in five and a half years, driven by lower retail prices and the government’s tax reduction, according to data from Korea National Oil Corp. compiled by S&P Global Platts.
South Korea’s auto fuels demand however is expected to slow this year because pump prices have started to climb and the government’s tax break is set to end in early May.
In January, South Korea consumed 7.33 million barrels of gasoline, up 12.6% from 6.51 million barrels a year earlier.
The rise marked the biggest increase since August 2013 when gasoline demand rose 12.8% from the previous year.
In terms of gasoline volume, it is the biggest since August 2016 when the country consumed 7.8 million barrels during the summer driving season.
The factors driving gasoline demand also led to the country’s consumption of gasoil in January to increase in the fastest pace since July 2017.
South Korea consumed 15.41 million barrels of gasoil in January, up 12.6% from 13.69 million barrels in the same month last year.
The January gasoil volume consumption of 15.41 million barrels was the biggest since December 2016 when the country consumed 15.59 million barrels.
“The rise in demand of the auto fuels was mainly driven by lower retail prices in line with weaker crude prices,” a KNOC official said.
92 RON gasoline pump prices– the more popular grade — averaged Won 1,351/liter ($1.2/liter) in January, down 13% from Won 1,552/liter a year earlier, according to the KNOC official.
Pump prices for 95 RON gasoline averaged Won 1,716/liter in January, down 7.7% from Won 1,860/liter in the same month last year.
Retail gasoil prices fell 7.1% year on year to average Won 1,249/liter in January, from Won 1,345/liter a year earlier.
“The lower pump prices were also helped by the government’s tax break,” the official said.
The South Korean government had cut auto fuel taxes by 15% for six months back in November, in order to help lower costs and boost domestic demand amid a slowing economy.
Taxes account for 55% of the retail gasoline price and 46% of the gasoil price, which prompted consumers to ask for a tax reduction. Domestic oil taxes are included in the transport tax, driving tax, consumption tax, education tax and value added tax.
“But auto fuels demand is likely to decrease later this year as retail prices are rising again and the government’s tax break is set to end,” the official said.
“Pump prices have started to rebound since the fourth week of February, which can affect auto fuels demands in March,” he said, noting the tax break ends in early May.
Japan’s January stockpile of gasoil dropped 22.4% from a year earlier to 8.1 million barrels and down 27.2% from December, largely due to the spike in consumption.
Gasoline stockpile also decreased to 6.52 million barrels in January, down 8.4% from December.