The disparity in gasoline prices between the two countries is widening by the day. Back in 1998, Japan’s yearly average gasoline price was 97.9 yen per liter (1,050 won based on the exchange rate at that time), while Korea’s stood at 1,123 won. However, the gap between these prices began to widen from that point on, with a 200 won difference in 2003 and a 363 won difference in 2006.

All the more surprisingly, the price of light oil in Korea recently surpassed the price in Japan, although the price has been traditionally higher in Japan.

In 2000, Japan’s average light oil price was 81.3 yen per liter (853 won based on the exchange rate at that time) and Korea’s was 613 won. However, the Korean price has been more than Japan’s since 2005. As of September 2007, the gap is around 300 won per liter, with prices around 1,295 won per liter for Korea and 989 per liter in Japan.

Considering per capita GNI in both countries, Koreans are paying more for oil prices than their counterparts.

According to the World Bank, Korea’s per capita GNI, recorded at 15,840 dollars as of 2005, is less than half of Japan’s (38,950 dollars). Allowing for Japan’s higher income, its gasoline price is equivalent to a mere 30 percent of Korea’s.

Currently, about 57 percent of Korean gasoline taxes go to the government. Contrary to the government’s claim that the tax rate on gasoline is more or less the same as other nations, the percentage of taxes at the pump in Korea is 13 percent higher than it is in Japan, where gasoline taxes make up 44 percent of the pump price.

When considering per capita GNI, the gasoline taxation percentage in Japan comes out to be only 22 percent, or about one fifth of Korea’s.

While the Korean oil industry is benefiting from firmly established monopoly and oligopoly conditions, more than ten Japanese oil refining companies and distribution companies are competing hard in a market that puts downward pressure on oil prices.

One official in the Korean oil industry said, “When international oil prices rise, Korean oil companies pass the burden to consumers. In contrast, Japanese firms offset the rise through intense competition.”

Yoon Won-cheol, an economics and finance professor of Hanyang University, said, “Developing oil fields cannot be done overnight, and there is limit to urging people to reduce consumption. At a time when the oil prices are so close to the 100 dollar/barrel mark, the only immediate choice for the government is to reduce oil taxes.”

PIN/DONGA.COM