Oil is like the blood of our economy. Petroleum is used in every process — trucks carrying goods, buses transporting citizens, and factories receiving raw materials. That is why international oil prices are not merely a commodity price but a benchmark variable that runs through logistics, production, and consumption. A single number on a gas station price board changes freight transport costs, which in turn flow through to the prices of products on supermarket shelves.
Our economy is particularly sensitive to international oil prices. This is because it relies almost entirely on imports for crude oil. A significant portion of that passes through the Strait of Hormuz. In the end, domestic fuel prices are influenced more by the situation in the Middle East than by our own choices. This means the economy carries a structural limitation that leaves it inevitably vulnerable to external shocks.
Recently, the biggest variable for international oil prices has been the unstable standoff between the United States and Iran. The two sides signed a memorandum of understanding (MOU) to end the conflict last June, but tensions remain. Military nerve-wracking continues over the Strait of Hormuz, the world's largest crude oil transport route, and the possibility remains that negotiations over the nuclear issue and sanctions against Iran could clash again. International oil prices react immediately even at the mere suggestion of a minor conflict. In fact, Dubai crude, which had fallen to the low $80s per barrel after the MOU was signed, has since seen increased volatility. As long as geopolitical uncertainty is not resolved, stability in international oil prices is difficult to guarantee.
Rising oil prices lead directly to rising prices. When diesel prices rise, the operating costs of trucks and construction equipment increase, which is linked to higher transport and logistics costs. Ultimately, the prices of industrial and agricultural products rise in a chain reaction. Even the price of vegetables on the dinner table is not free from the burden of transport costs.
Self-employed business owners bear the burden of rising delivery fees and supply prices, while households must endure increases in fuel and heating costs. Once prices that begin with rising costs go up, they do not come down easily. Real purchasing power declines and consumption shrinks. This is why international oil prices stand at the starting point of a vicious cycle in which high prices breed a domestic demand slump, which in turn leads to an economic slowdown.
The representative policy tool the government can choose at this point is the fuel tax. Cutting the fuel tax can ease consumer burdens and inflationary pressure to a certain degree. At the same time, however, it comes with the burden of reduced fiscal revenue. The transport, energy, and environment tax, which accounts for most of the fuel tax, is an important revenue source for national finances. As recent fuel tax cut measures have been prolonged, concerns about declining tax revenue have also grown.
But the purpose of taxation does not lie solely in securing revenue. When external shocks shake the economy, flexibly adjusting tax rates to absorb the shock is also an important function that taxation must perform. In that sense, fuel tax cuts should be viewed not as a simple tax reduction policy but as a policy tool to stabilize the macroeconomy. In our economy, which has high external dependence, the fuel tax should serve as a buffer that absorbs shocks from international oil prices.
The problem is the current operating method. The current way of extending fuel tax cuts through revisions to the enforcement decree each time has low predictability and weak policy consistency. Rather than repeating stopgap measures every time an external shock occurs, there is a need to advance the system itself.
First, a rules-based fuel tax adjustment system linked to international oil prices should be introduced. This means legislating a structure in which the fuel tax is automatically reduced when international oil prices exceed a certain threshold and returns to the normal rate when they fall back into the stable range. The market can operate in a predictable environment without waiting for the government's decisions, and the speed of policy response will also become faster.
In addition, the current universal fuel tax cut method also needs to be reexamined. Rather than providing the same benefit to all drivers, it is desirable in terms of fiscal efficiency and policy effectiveness to concentrate fuel subsidies on groups that face larger shocks from rising oil prices, such as truck drivers, the transport industry including buses and taxis, and low-income groups. Unnecessary fiscal spending can be reduced, while thicker support becomes possible where it is truly needed.
The fuel tax is not a passive tax dragged along by international oil prices. If properly designed, it can become a macroeconomic safeguard that absorbs external shocks and protects the livelihood economy. What is needed now is not temporary extension but institutionalization. Only when we have rules that automatically respond to fluctuations in international oil prices and a precise support system centered on vulnerable groups will the fuel tax finally become a solid pillar supporting the economy.
