Ruling Party and Government Push to Abolish 'Post-Settlement and Exclusive Supply Contracts'... Fuel Discounts and Points May End

Measures Overlooking Distribution Structure

Concerns Over Gas Station Financial Strain and Supply Disruptions

Industry: "Potential Side Effects Must Be Considered"

As the government and the ruling party move to abolish the “post-settlement system” and “exclusive supply contracts” in the oil refining industry to address oil price instability caused by the Middle East conflict, critics argue that these measures are hasty and do not take into account the distribution structure. There are growing concerns about potential side effects if the transaction system that has been in place for decades collapses, such as financial difficulties for small and medium-sized gas stations and disruptions in supply to island and mountainous regions. As a result, both the oil refining and gas station industries are calling for a careful review.

According to industry sources on April 2, the Euljiro Committee of the Democratic Party of Korea, the Ministry of Trade, Industry and Energy, the Fair Trade Commission, and other government bodies held the “Second Meeting of the Social Dialogue Body” the previous day and agreed to overhaul the post-settlement and exclusive transaction structures. The plan is to abolish the post-settlement, which currently takes place one month after delivery, or shorten it to about one week, and to lower the proportion of exclusive transactions from 100% of a certain refinery's products to a 50% limit.

As the government announced the second highest prices for petroleum products, gasoline and diesel were sold at 2,170 won and 2,180 won per liter respectively at a gas station in Seoul on the 27th, with an increase of 210 won per liter. March 27, 2026. Photo by Kang Jinhyung

The post-settlement system refers to a system in which oil refiners supply fuel to gas stations first and settle the final price later. Since it usually takes four to six weeks to import crude oil, refine it, and supply it, this system is intended to minimize the dual risks of exchange rate and oil price fluctuations. As the final settlement price is usually lower than the initial delivery price, it is also called the “post-discount system.”

The government and ruling party believe that the post-settlement system leads gas stations to raise retail prices preemptively, as they do not know how much wholesale prices will increase a month later, resulting in higher initial prices.

However, the oil refining industry explains that the current delivery price is calculated based on publicly disclosed external indices, making it impossible for refiners to manipulate it arbitrarily. An industry official said, “Gas stations can freely choose between confirming the price at the time of purchase (fixed price at the time of sale) and the post-settlement system. The reason many gas stations opt for post-settlement is that, because there are many small and medium-sized operators in Korea, there is a need to reduce price fluctuation risks.” He added, “Although the situation has become complicated due to the ongoing war, for the most part during peacetime, the final settlement price was usually lower than the initial delivery price, so gas stations often received a refund from refiners at the end of the month.”

From a legal perspective, the Supreme Court ruled in 2013 that “post-settlement does not cause disadvantages to gas stations or hinder fair trade.”

The industry also believes that more discussion is needed on the view that exclusive supply contracts are inherently unfair transactions. Exclusive supply refers to a distribution structure where a gas station signs an exclusive contract with a single refiner and purchases and sells only that refiner’s products. These contracts are generally signed and renewed annually, and gas stations can review contract conditions each year and change refiners or contract types. Industry insiders explain that, because gas stations voluntarily choose and renew these contracts, they are not subject to compulsory restrictions.

A representative of the Korea Oil Station Association said, “Opinions on exclusive supply contracts are divided depending on the need for facility support. Some gas stations prefer five-year exclusive contracts with various benefits such as facility support, and if such support is not provided, it can be difficult to operate, making exclusive purchase contracts inevitable.”

Gas stations with exclusive supply contracts receive a variety of benefits, including brand usage rights, bonus points or discount card services, facility investment support, customer appreciation events, and advertising support, in addition to being able to sell specific branded products.

Oil refiners also benefit from exclusive relationships by being able to predict gas station demand and make supply plans from a supply stability perspective. If exclusive contracts are abolished, refiners may terminate supply contracts with gas stations in less profitable island and mountainous regions first, according to market logic, especially when the energy supply chain is unstable as it is now.

An oil refining industry official said, “Looking at cases in major overseas countries, the trend is not toward a complete abolition of exclusive supply contracts, but rather securing fairness through regulatory improvements. While we believe the exclusive transaction structure provides practical benefits to both gas stations and consumers, we will continue discussions on improving the system and seeking reasonable alternatives to prevent distrust in the system from accumulating.”

This content was produced with the assistance of AI translation services.