Gov't to extend fuel tax cuts through July to combat rising energy costs

People walk by at a gas station in Seoul on May 6. [NEWS1]

Korea will extend its fuel tax cut measures by two months, through the end of July, the government announced Thursday, as rising energy costs linked to the Iran war continue to weigh on household budgets.

The current reduction rates will hold steady — 15 percent for gasoline and 25 percent for diesel — according to Deputy Prime Minister and Finance Minister Koo Yun-cheol at a ministerial task force meeting at the Government Complex in Jongno District, central Seoul.

Fuel tax per liter will consequently stay at 698 won (50 cents) for gasoline, down 65 won from the standard rate of 763 won, and 436 won for diesel, down 87 won from 523 won.

Fuel taxes are levied on oil companies when products leave the refinery, and cutting them helps contain consumer prices at the pump. The government said the steeper cut for diesel reflects its heavy use in industry.

The measures were originally set to expire at the end of May. They were first introduced alongside a second round of oil price caps on March 27, aimed at easing the financial burden on households following the outbreak of the war in Iran.

The government had left open the possibility of a further extension, pointing to stubborn inflation as justification. Consumer prices rose 2.6 percent last month — the sharpest increase in one year and nine months — driven largely by a 21.9 percent surge in energy prices that alone added 0.84 percentage points to overall inflation.

“We are looking into international oil price trends, changes in petroleum product prices and consumption, the impact on consumer prices, and the need to ensure that costs do not exceed the 4.2 trillion won secured through the contingency reserve budget," said Kang Gi-ryong, deputy vice minister at the Ministry of Finance and Economy. “We are not yet at the stage where ministries are seriously discussing exactly when [the measure] should end.

"The Ministry of Trade, Industry and Energy will consider plans for operating the system, and we will be able to speak separately about that matter at an appropriate time.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.