Prosecutors have unveiled findings that South Korean oil refiners engaged in oil price fixing worth 26 trillion won, using the U.S.-Iran war as an opportunity. Prosecutors concluded that some refiners coordinated the timing and scale of price increases in advance, and that other companies also joined the wave of hikes by referencing competitors' prices. They also detected signs that the companies attempted to destroy evidence, such as deleting related materials, once the investigation gained momentum.
According to the legal community Friday, the Fair Trade Investigation Division of the Seoul Central District Prosecutors' Office (led by chief prosecutor Na Hee-seok) indicted four oil refiners — HD Hyundai Oilbank, SK Energy, GS Caltex, and S-Oil — the previous day on charges of violating the Fair Trade Act. Also indicted were the head and responsible manager of HD Hyundai Oilbank's price-setting department, its legal office chief, and GS Caltex's domestic sales division head. The combined market share of these four companies in the domestic oil refining market is 98.6%.
Prosecutors launched the investigation by raiding the four refiners and others on March 23, to determine the background behind the sharp rise in domestic petroleum product prices immediately after the U.S.-Iran war.
According to prosecutors, HD Hyundai Oilbank and SK Energy were found to have continuously exchanged competitors' price information from July 2024 to February this year. The two companies separately designated staff to track the other's prices, and based on this, coordinated the scale of price increases and the timing of their application.
Prosecutors believe this exchange of information effectively led to an agreement on price increases immediately after the U.S.-Iran war. At the time, the four refiners had already secured a considerable amount of crude oil, so a sharp price increase was not unavoidable. Nonetheless, the price-setting officials at HD Hyundai Oilbank and SK Energy reached agreement on a method by which SK Energy would set prices 30 to 40 won per liter higher, and simultaneously reflected this in the market.
GS Caltex and S-Oil were found not to have directly participated in the price agreement. However, prosecutors judged that they followed the trend of increases by checking competitors' prices in real time. In S-Oil's internal messenger, conversations such as "Looks like we'll make 2 trillion won this year" and "A company that lives off war after all. Hail Trump" were exchanged, and in GS Caltex's price-setting department, there were also instructions to the effect of "Let's decide by looking at other companies," the investigation found. However, prosecutors, judging that such price-following behavior alone is difficult to subject to criminal punishment under the Fair Trade Act, did not indict GS Caltex and S-Oil on those charges.
The indictment also included content that the refiners used their superior bargaining position against independent gas stations. According to prosecutors, from January 2021 to last month, the refiners signed full-volume purchase contracts with independent gas stations, effectively preventing them from handling other companies' products, and maintained a post-settlement method in which the refiners unilaterally set supply prices and then finalized them at month's end.
Because of this contract structure, gas stations had to buy only a specific refiner's products without accurately knowing the actual supply unit price, and had to bear large damages or various disadvantages if they violated the contract. Prosecutors judged that this transaction method enhanced the refiners' price-setting power and consequently acted as a factor in passing the burden of price increases onto consumers. Full-volume purchase contracts were the subject of a corrective order from the Fair Trade Commission in 2009, but the contract conclusion rate among the four refiners still reaches an average of about 98%, the investigation found.
Na Hee-seok, chief prosecutor of the Fair Trade Investigation Division at the Seoul Central District Prosecutors' Office, explained, "The trading parties are the refiners and gas stations, but it is a structure in which the refiners unilaterally decide prices and take all the financial benefits from post-settlement," adding, "Even an official from the Korea Oil Station Association testified that 'it's a structure where the refiners are like kings.'"
Attempts to destroy evidence were also confirmed during the investigation. HD Hyundai Oilbank legal office chief A is suspected of ordering the deletion of computer data containing competitors' price information after obtaining the Fair Trade Commission's on-site inspection plan in advance. GS Caltex domestic sales division head B is also believed by prosecutors to have ordered the deletion of price-related in-house messenger conversations.
This case could affect future discussions on loss compensation under the oil price-cap system. The oil refining industry claims that it suffered losses of up to 5 trillion won during the implementation of the price-cap system, based on manufacturing costs reflecting Singapore's international petroleum product prices (MOPS), Korean refined oil premiums, and tariffs. However, prosecutors said that the internal materials they secured contradict such claims.
"For gasoline, all four refiners, and for diesel, one refiner, were profiting on a manufacturing-cost basis even after the price-cap system was implemented," Na said. "Demanding loss compensation is ultimately no different from demanding additional profit." The government has budgeted 4.2 trillion won in reserve funds in preparation for the possibility of loss compensation.
The oil refining industry is maintaining a cautious stance regarding the prosecutors' announcement. One industry official said, "For now, we have no separate position to state," adding, "We will sufficiently explain the necessary parts in court proceedings." Another official argued, "Monitoring competitors' price trends is a common business activity in the industry," and claimed, "The materials presented by prosecutors are also not decisive evidence but rather show the market situation and internal perceptions at the time."
Regarding full-volume purchase contracts and post-settlement practices, the industry says it is already undergoing improvement procedures. In April, the four refiners drew up a win-win plan to abolish the exclusive trading system and post-settlement system, following mediation by the Democratic Party's Euljiro Committee and others.
