A comparison between Korean gas market and oil market in the consideration of South Korean gas market reform

• Main Author: Ko, Yeonseok
• Format: Others
• Language: en
• Published: 2014
• Subjects: Gas market reform; South Korean gas market; Competitive energy market; Competitive oil market; Similarity between oil and gas
• Online Access: http://hdl.handle.net/2152/26104

South Korea established a non-competitive natural gas market in order to have a stable and economical supply of natural gas. The allegation has been raised about the inefficiency of this non-competitive market structure, but reform attempts have failed because of protests. Proponents of this incumbent system argue that gas needs to be supplied by the public sector in a monopolized structure so as to have a stable supply of this essential good, natural gas, and to prevent market failures like exorbitant gas prices and a deficit in supply due to a natural monopoly. They also argue that the unified gas purchase endows purchasing power. However, the gas industry does not exactly meet the categorical characteristics of an essential good or a natural monopoly and the concept of purchasing power is hardly accepted. Moreover, according to agent theory and property theory, the current market and firms are likely to be inefficient; several events are proving this inefficiency to be true. However, people remain unsure about the necessity of gas market reform. Ironically, South Korea has a different policy and market approach to the oil market despite the similarity of these two fuels. The oil market in South Korea constitutes an effective competitive market via a liberalized market, and is supplying the fuel stably and economically, contrary to people’s expectations. This thesis contrasts different approaches in South Korea toward similar hydrocarbon fuels, oil and gas. The competitiveness of the oil market is examined through statistics, Lerner index, analyzing of the profit trend in the market, and price comparison by countries. Results support the validity of South Korean gas market reform if the oil market is effectively competitive through liberalization. === text