Cutting an LPG Slice

20 Jun

Taxi Strike in South Korea As much as I enjoyed the taxi-free roads in Busan and disagree that fuel should be cheaper, gas importers are full of fumes.

Over 200,000 cab drivers congregated as part of a nationwide strike by the main taxi unions, who are seeking cuts in the cost of liquefied petroleum gas used by most cabs and a rise in the flagfall fare of 2,400 won ($2.08), which has remained unchanged since 2009.

(…)

Drivers say they use around 30-40% of their earnings to pay for LPG, which has soared over 50% in price since 2009, according to gas information website Petronet.

Ulsan Dongwon Taxi Union Chairman Im Won-taek said it’s hard for drivers to earn 1.3 million won per month ($1,128) even after 13 to 15 hours of work every day.

(…)

The ministry said it has asked gas importers and the Korea LPG Association to cooperate with gas price stabilization. The industry body says that international pricing makes that difficult but it would do its best to find ways to stabilize prices.

Only the international market is a sizeable reason for pump prices, but not the only piece of the puzzle. Refining costs, distribution and marketing, and taxes also matter. This isn’t so much a market problem as a turf battle between the government, consumers, every industry player in the fuel chain, and taxi drivers over who profits the most and who pays the most. It also highligts how politically weak unions are.

However, the union members are unlikely to have much bargaining power in their negotiations with the government or fuel providers as their first strike did not cause a major turmoil during commuting hours. South Korea has one of the best mass transportation systems in the world and authorities increased bus and subway services during the strike. If anything, Koreans rather welcomed the eased gridlock on the roads in the absence of taxis.

Instead, the effect of the strike may be on the morale of other unionised workers in corporate Korea. The country’s militant labour unions continue to lose their power, and although they still see striking as the last resort to get demands accepted, it is becoming a less effective tool. An example KBS, the state-run major broadcasting company – a workers’ three-month strike ended earlier this month without many compromises from management.

However, it’s best not to underestimate the power of labour unions in this strike-prone country. Protracted large-scale strikes in key sectors that provide essential services could still wreak havoc with the economy.

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