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| Fuel prices are displayed at a gas station in Seoul, Monday. Yonhap |
By Park Jae-hyuk
SK Innovation, S-Oil, GS Caltex and Hyundai Oilbank appear to be more obedient to government policies amid growing calls from politicians to impose a tax on the windfall profits of the nation's four oil refiners, according to industry officials, Tuesday.
A "windfall tax" refers to a higher tax rate on profits generated from a sudden windfall gain to a particular company or industry.
After the global shortage of energy allowed oil refiners to enjoy handsome profits, the U.K. decided last month to impose a 25-percent windfall tax on oil and gas producers' profits, while the U.S. Democrats proposed a 21-percent surtax on the excess profits of oil and gas companies with more than $1 billion in annual revenue.
Earlier this month, U.S. President Joe Biden even accused oil companies of exploiting high gasoline prices, saying, "Exxon made more money than God."
Korea's four oil refiners also posted record profits during the first quarter of this year, thanks to the surging global oil prices and higher refining margins. Their combined quarterly operating profit reached 4.7 trillion won ($3.6 billion), up 2.5 trillion won from the previous year.
They are expected to continue making handsome profits during the second quarter.
Such a trend has prompted Korean lawmakers to propose a windfall tax, regardless of their political orientation.
Rep. Kweon Seong-dong, the floor leader of the ruling conservative People Power Party, even said last Thursday that "domestic oil refiners should not enjoy the higher oil prices alone," urging them to share the burden.
The government has also zeroed in on the country's oil refiners.
The Ministry of Trade, Industry and Energy organized an inspection team with the Fair Trade Commission recently to find out whether or not the oil refiners fixed their fuel prices in collusion, given that their prices have remained high, despite an additional reduction in the fuel tax.
In an apparent attempt to appease the public, the oil refiners issued a statement, Monday, promising that they will make efforts for consumers to realize the effect of the sharpest fuel tax cut as soon as possible.
"The fuel tax reduction will be reflected in our prices, once it is implemented on July 1," said the Korea Petroleum Association, which consists of the four domestic oil refiners.
The Korea Oil Association and the Korea Oil Station Association also said that they agree with the government's decision to lower fuel tax additionally.
An oil refining industry official, however, pointed out that their efforts to support the government policies will have a limited impact.
"Domestic oil prices fundamentally depend on global prices," the official said on condition of anonymity. "Even if a windfall tax is introduced, the government will not compensate for any losses of oil refiners when the global oil prices go down."
Securities analysts were also skeptical about a windfall tax on the profits of the oil refiners.
"The massive profits of the oil refiners this year can be used for their investments in new businesses, such as recycled plastic, hydrogen and batteries, so it seems to be better to enact a law enabling the Korean energy industry to make a leap forward, rather than imposing a windfall tax," Hana Securities analyst Yoon Jae-sung said.
