Despite Indictment of Refiners for '14 Trillion Won Wartime Collusion'... Government to Proceed with 4 Trillion Won Compensation Settlement as Planned

Ministry of Trade, Industry and Energy: "Settlement to Proceed Regardless of Collusion"
Objectivity of Data Is the Key Variable

The government has decided to proceed as planned with the compensation settlement process for oil refiners under the petroleum price ceiling system, despite the prosecution's indictment of the four major refiners for collusion. With over 4 trillion won in public funds expected to be injected to cover losses resulting from the price ceiling system, the reliability of the data submitted by the indicted companies and the verification process have emerged as new points of contention, as compensation amounts must be calculated based on the materials provided by these companies.

On July 7, a senior official at the Ministry of Trade, Industry and Energy told The Asia Business Daily by phone, "Regardless of the prosecution's investigation, the compensation settlement procedures for the price ceiling system will be carried out as planned."

Previously, in March, when international oil prices surged due to military conflict between the United States and Iran, the government introduced a price ceiling system for gasoline, diesel, and kerosene under the Petroleum Business Act. Refiners were prohibited from selling above government-set prices, but the losses incurred by this price regulation were to be compensated retrospectively. To this end, the government allocated a reserve budget of 4.2 trillion won.

Last month, the government established detailed settlement procedures by enacting the "Fiscal Support Regulations for Compensation Due to Designation of Maximum Petroleum Sales Prices." Oil refiners must submit data necessary for loss calculation — including costs, sales prices, transportation, insurance, and distribution expenses during the ceiling period — by August. The Ministry of Trade, Industry and Energy plans to determine the final compensation amount after external expert agencies verify costs and after a review by the Maximum Settlement Committee. Losses will be calculated based on actual costs, not the Singapore Mean of Platts (MOPS) price for petroleum products.

The variable is the prosecution's investigation. The Seoul Central District Prosecutors' Office announced the previous day that SK Energy and HD Hyundai Oilbank had colluded to coordinate both the timing and magnitude of gasoline and diesel price increases during the period of international oil price surges, and that GS Caltex and S-Oil had also joined in. The four refiners have been indicted for violating the Fair Trade Act. Prosecutors have determined the direct scale of the collusion to be 14.2 trillion won, and estimate that the total price increase effect, including follow-on increases, amounts to approximately 26 trillion won.

The prosecution also revealed evidence that some refiners had falsely reported petroleum product supply prices to the Ministry of Trade, Industry and Energy at lower-than-actual levels. However, the ministry maintains that the alleged false reporting identified by prosecutors occurred before the implementation of the price ceiling system and is therefore not directly related to the current compensation settlement. A ministry official explained, "The compensation data have not yet been submitted and are expected by August," adding, "We understand that the false reporting pointed out by prosecutors concerns data from before the price ceiling system was implemented."

However, since the basic data for compensation calculation will be submitted by the very refiners indicted for collusion, controversy over the credibility of the settlement process appears inevitable. In particular, with prosecutors having disclosed instances of false reporting by some companies, ensuring the objectivity and accuracy of the submitted data has become a key challenge for the settlement procedure.

Divergences persist between the government and the oil refining industry over the standard for loss calculation. The industry has argued that, as the price ceiling cost them overseas sales opportunities, losses should also reflect both the Singapore Mean of Platts (MOPS) and the opportunity cost of exports. In contrast, the government maintains its principle that, since taxpayer money is being used, only actual input costs and an appropriate level of margin will be recognized. As a result, there is a significant possibility that the loss amount requested by the industry and the compensation ultimately recognized by the government will differ considerably.

A ministry official stated, "Rather than automatically accepting the data submitted by refiners, we will cross-verify costs and the scale of losses through external expert institutions, and then determine both the eligibility and amount of compensation after a review by the Maximum Settlement Committee."

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