The first settlement amount for the maximum oil price system will be released at the end of this month... Perception of cost and appropriate margin

The government will calculate the amount to compensate for losses suffered by domestic oil refineries due to the implementation of the maximum oil price system as early as this month for the first time.

As the government and the oil refining industry have differed over the calculation standard, it is expected that the actual settlement will continue to be difficult.

According to the government on the 9th, the Ministry of Trade, Industry and Energy plans to complete the calculation of the first settlement amount at the end of this month and notify oil refineries of the results.

The Maximum Settlement Committee has been reviewing whether and how much support will be provided after receiving loss compensation application data from oil refineries. The period covered by the first settlement is from March 13, when the maximum price system was introduced, to June 30.

Oil refineries can file an appeal within 30 days after being notified of the results.

The government plans to confirm and pay the amount within the year at the earliest, but there is a possibility that the schedule may be delayed depending on whether or not there are objections.

The key is the scope of cost recognition and appropriate margin standards.

The government and industry have differed in their positions on setting the amount of compensation for losses since the beginning of the implementation of the maximum price system.

Last June, the government announced the 'Financial Support Regulations for Compensating for Losses Due to Designation of the Maximum Petroleum Sales Price' and announced that it would use the cost as the standard.

Costs include crude oil import costs including the purchase price of crude oil and petroleum products, transportation costs, insurance premiums, etc., production and sales costs including depreciation costs, labor costs, fuel costs, domestic distribution costs, and other related costs.

In addition, the government specified that ‘an appropriate level of margin may be considered.’

However, the industry has argued that the difference from domestic prices should be recognized based on the Singapore International Petroleum Product Price (MOPS) selected in the market.

Even after the government announced its notice, there were concerns that standards for cost and appropriate margins were still vague.

There were already predictions in the industry that cumulative losses would reach 5 trillion won by June, but the government has set aside 4.2 trillion won in reserve funds on the premise that the maximum price system will be implemented for six months.

The Ministry of Trade, Industry and Energy has allocated 1.4497 trillion won in next year's budget, assuming that the maximum price system will be implemented until the fourth quarter of this year.

An official from the Ministry of Trade, Industry and Energy said, “According to the cost-based compensation principle, the settlement amount can be covered within the budget,” and added, “As it is an amount supported by taxes, we are carefully examining it.”