S.Korea offers $10.2 bln package to ease oil burden

SEOUL: South Korea said on Sunday itwould spend 10.5 trillion won ($10.2 billion) over a year to help ease thefinancial burden on some 14 million people from a surge in oil prices, callingthe situation a crisis. Prime Minister Han Seung-soo told a news conference thegovernment planned to refund part of the additional money that low incomeearners spend on buying fuel.

"The super-high oil prices areaffecting not only our country but the whole world. But the difficulty isespecially severe with our country that produces not a single drop of oil but isthe world's fifth-largest oil consumer," Han said. South Korea's financialmeasures to alleviate the pain on oil users come as other Asian countries rollback oil subsidies which are proving too costly for governments to shoulder.India and Malaysia raised fuel prices last week, joining a growing list of Asiangovernments no longer able to afford big subsidies and triggering protests.

South Korea's package accounts for half of the additional costrising oil prices cost the country of 49 million people annually, Han said. Headded the government did not need to collect more tax or incur debt to fund thepackage but would use surplus tax revenues from last year and a surplus expectedover the next year. The measures come days after data showed annual consumerprice inflation in May hit a seven-year high of 4.9 percent, led by fuel costsand staying above the central bank's target of between 2.5 percent and 3.5percent for the sixth month in a row.

Finance Minister Kang Man-soosaid the government did not lower domestic levies on fuel sales as lower taxescould spur consumption and it wanted to ensure the poor benefited more. PrimeMinister Han said the government would consider cutting domestic fuel salestaxes and other additional measures once the Dubai crude price rose past $170per barrel. Prices are presently at $122.89.

Group of Eight energyministers are meeting on Sunday amid unprecedented volatility in oil markets andgrowing public discontent over a failure by governments to soften the blow onconsumers as crude prices climbed further on Friday, rising morethan $10 to a record $139 a barrel. Energy officials from five top consumernations including South Korea urged producers to step up investment on Saturday,but they offered no new ideas on how to deal with record prices and remaineddivided on fuel subsidies. The United States called for an end to heavy pricesubsidies that protect many Asian drivers from soaring costs, but China andIndia said they could only raise domestic rates gradually in view of theirfragile economies.