It has been revealed that the government calculated KRW 1.5 trillion per KRW 100 gap in oil prices when budgeting for targeted contingency reserves to compensate refineries for losses resulting from the implementation of the petroleum price ceiling system.

According to data submitted by the Ministry of Trade, Industry and Energy (MOTIE) to Representative Cho Ji-yeon of the ruling People Power Party on the National Assembly's Committee on Trade, Industry, Energy, SMEs and Startups today (October 4), MOTIE stated that it calculated KRW 1.5 trillion per KRW 100 gap as the budget for refinery loss compensation under the petroleum price ceiling system.

This explains that the ministry estimated KRW 1.5 trillion would be necessary to compensate refineries for losses when the difference between the estimated price without the price ceiling system and the maximum price set by the government is KRW 100.

MOTIE added that this was based on the premise that the gap would not exceed KRW 200.

Previously, on March 13, the government implemented the petroleum price ceiling system—which places a ceiling on the supply prices of refineries to gas stations—and allocated KRW 4.2 trillion in targeted contingency reserves to compensate refineries for losses incurred accordingly.

Regarding the reason for calculating KRW 4.2 trillion, MOTIE explained, "We estimated KRW 2.76 trillion based on cost criteria for the second and third quarters (through September), but allocated an additional KRW 1.5 trillion in response to the National Assembly Budget Office's opinion that we must prepare for the possibility of crude oil prices soaring to USD 150."

As for the cost calculation standards used as a benchmark when compiling the contingency reserves, it reported that the Korea Energy Economics Institute ran various simulations to derive the estimates.

By September 30, MOTIE received data on costs and company-specific requirements regarding losses incurred from March 13 to June 30 from each refinery.

Based on this, it plans to establish common criteria through the Supreme Settlement Committee and finalize settlement prices by the end of November, taking into account refinery-specific costs and appropriate margins.

It also explained that loss compensation funds will be disbursed to refineries immediately afterward, and once settlement prices are finalized, quarterly settlements for the period after July will proceed sequentially without disruption.

According to MOTIE's written response, the Supreme Settlement Committee has met a total of six times since July.

Meanwhile, the government set the 10th petroleum price ceiling, applied for a four-week period starting September 19, at the same rates as the 9th: KRW 1,784 per liter for gasoline, KRW 1,773 for diesel, and KRW 1,380 for kerosene.