Korean government mulls extending fuel tax cut for 2 months amid high inflation

The South Korean government is considering extending the fuel tax cut scheme that is set to expire this month for another two months until the end of December to help ease price pressure on the households amid high inflation.

“If the current upward trend in international oil prices does not ease, we will actively consider the plan of extending the fuel tax cut scheme for about two months,” said Economy and Finance Minister Choo Kyung-ho on Thursday.

Under the scheme, a 25 percent discount is applied on the consumption of gasoline and 37 percent on diesel.

Choo’s remarks were made as the country’s inflation hit a five-month high in September.

Statistics Korea announced Thursday that the country’s consumer price index (CPI) rose 3.7 percent on year in September.

Inflation has slowed after peaking at 5.2 percent in January as electricity and gas bills surged amid the unusually cold weather.

However, higher oil prices coupled with agricultural damage caused by heat waves and typhoons led consumer prices to gain more than 3 percent for two straight months after 3.4 percent in August.

The average price of benchmark Dubai crude rose by 7.5 percent on month to $91.3 per barrel in September. Agricultural product prices also surged 7.2 percent, marking the steepest increase in 11 months since 7.3 percent in October last year.

The government and the Bank of Korea, in the meantime, expected that prices will stabilize from this month onwards given that the latest gain was largely affected by temporary factors such as oil prices and heat waves. When excluding volatile items such as agricultural products and petroleum, core inflation, which reflects the underlying price trend, rose by 3.8 percent in September, which is lower than the previous month’s 3.9 percent.

International oil prices have also started to decline.

The price of West Texas Intermediate (WTI) crude oil futures for November delivery on the New York Mercantile Exchange plunged 5.6 percent from the previous day returning to the level of a month ago on Wednesday, local time.