Struggling with Gas Price Hikes: Small Business Owners Face Financial Strain

With the recent increase in gas prices starting from August

With the recent increase in gas prices starting from August, small business owners in South Korea are feeling the pinch. The rise in gas prices, driven by production cost increases and the financial losses of Korea Gas Corporation, is exacerbating the difficulties faced by many small businesses already grappling with low sales and high operational costs.

On August 4th, Jeon Min-jun (53), who runs a hangover soup restaurant in Gwanak-gu, Seoul, expressed his frustration over the gas price hike. He noted, "Compared to before COVID-19, my sales have decreased by 30-40%, but my gas bills are still 1.8 million won every month." In an effort to reduce operating costs, Jeon has shortened business hours and cut down on staff. He added, "I previously raised the price of soju by 1,000 won, and there was a fight with a customer. Raising food prices is not an option."

Gas prices for residential use have increased starting August 1. This hike is a response to rising production costs and the growing deficit faced by Korea Gas Corporation. The price for residential gas in Seoul has risen by 6.8% from 20.8854 won per MJ to 22.2954 won. Commercial gas rates have also increased, with commercial rate 1 rising by 6.4% to 21.8035 won and commercial rate 2 increasing by 6.7% to 20.8018 won.

The price hike is attributed to the large deficits that have accrued. Korea Gas Corporation reported that its receivables for residential gas surged from 1.8 trillion won in January 2021 to 8.6 trillion won by 2022, and further increased to 13.5 trillion won in the first quarter of this year. The company stated that the increase was necessary to ensure a stable supply of natural gas.

Business owners like Bae Mo (53), who runs a Chinese restaurant in Gwanak-gu, are also distressed by the news. Bae mentioned, "The last gas price hike raised our bill from 2.3 million won to 2.7 million won. When we sell 10,000 won worth of food, we only make 800 won profit, and now they are raising the prices again, which is very concerning."

Choo Mo (61), who works at a stew restaurant in Gwanak-gu, was equally shocked by the increase. Since the COVID-19 pandemic, the restaurant reduced its staff from seven to three due to soaring prices. Choo noted, "Even though business is tough during the summer, our gas bill is 600,000 won a month, rising to 1 million won in the winter. We are told that the prices will increase regardless of our objections, but I don't know how the common people are supposed to handle this."

With the increase in public utility prices, including electricity, which is also affected by the energy crisis stemming from the Russia-Ukraine war, there are concerns about further hikes. Industry experts, including Minister of Trade, Industry, and Energy An Deok-geun, have stated the need for a careful approach to normalizing utility prices, while keeping an eye on geopolitical uncertainties.

Experts suggest that while public utility price adjustments are necessary, there should be considerations for small businesses. Professor Shin Se-don from Sookmyung Women’s University suggested that, "For very small businesses, even minor changes can have a significant impact. The government might consider providing financial support to cover a portion of the gas bills for these businesses."

As gas prices rise, small business owners face mounting financial pressure. While price adjustments are necessary for economic stability, it is crucial for the government to explore supportive measures to help alleviate the burden on the most vulnerable sectors.