The Korean Ministry of Knowledge Economy will cut import tariffs on crude oil in a bid to reduce oil prices as an additional countermeasure to the July 6 expiration of a temporary cut in oil prices (9 cents per liter) by oil companies.

The Strategy and Finance Ministry has objected to the move, however, citing a decline in tax revenue. Obstacles are thus expected until the reduction of the tariffs.

Vice Knowledge Economy Minister Kim Jung-kwan said, “We`re discussing the lowering of import tariffs on crude oil to help stabilize oil prices,” adding, “If the tariffs are lowered, this can effectively reduce oil prices 15 to 20 won per liter.”

A Strategy and Finance Ministry source expressed objection, however, saying, “A cut in tariffs on crude oil will have little impact on reducing oil prices, but tax income will decline by hundreds of millions of (dollars).”

The Knowledge Economy Ministry is considering lowering import tariffs as a top priority in light of fiscal soundness, because a cut in oil taxes based mostly on volumes (levied according to quantity of goods as the tax base) will result in a significant reduction in tax revenue.

In a related move, gas stations are seeking to “hoard” fuel en masse ahead of the end of the oil price cut, which has remained in effect for three months, and oil prices are showing signs of rising from next month.

According to the Knowledge Economy Ministry, gas stations have submitted about 10 civil complaints, reporting the shortage of oil supplies from GS Caltex due to hoarding since last week.

The Knowledge Economy Ministry called in officials from oil companies and checked the situation of hoarding Wednesday last week, and urged companies to cooperate to secure a soft landing of oil prices. That is, since consumers will face a significant shock from a 100-won (9 cents) hike per liter in oil prices, the ministry is urging oil refiners to raise prices in phases.