Why are fuel prices falling in North Korea?

Gas station on the outskirts of Pyongyang
Gas station on the outskirts of Pyongyang. Image: Daily NK

International oil prices have increased steadily since the start of the year, but fuel prices in North Korea are currently falling as strong international sanctions have limited fuel imports into the country.

A Daily NK investigation found that the price of one kilogram of fuel on April 30 was 8,600 KPW in Pyongyang, 8,560 KPW in Sinuiju, and 9,400 KPW in Hyesan, all of which points to a fall of around 42% from earlier in the year (15,200 KPW). These current prices are around 8.1% lower than just two weeks ago (9,600 KPW).

Diesel prices are also falling: one kilogram of diesel in Pyongyang cost 6,500 KPW, 5,440 KPW in Sinuiju, and 6,500 KPW in Hyesan. These prices are around 29% lower than earlier in the year (8,600 KPW), and around 8% lower than just two weeks ago (6,700 KPW).

The price of gas in Pyongyang in February was 11,800 KPW, 12,200 KPW in March, and 9,200 KPW in early April, but by late April the price had fallen to 8,600 KPW. Gas prices in Pyongyang rose briefly in March, but nevertheless were part of a broader fall in prices since the start of the year.

Price comparison of North Korean gasoline and diesel prices in 2019
Price comparison of North Korean gasoline and diesel prices in 2019. Data: Daily NK

South Korea, in contrast, has seen a rise in fuel prices. It is a mystery as to why gas prices in North Korea have continued to fall given the reduction in imports of crude oil and refined oil due to UN Security Council Resolution No. 2397.

“It’s not clear what the real reason for the fall in prices is,” a source in Pyongyang told Daily NK on May 9. “Rumors in North Korea suggest that the state is somehow bringing fuel into the country from abroad.”

North Korea observers are closely watching the domestic fuel supply. Some experts believe that North Korea is using what’s referred to as “illegal transshipment” to bring in fuel from abroad.

“North Korea is using illegal transshipment to supply the country with as much fuel as there was before the sanctions took effect,” said Kim Kyung Sul, a senior researcher at the Korea Energy Economics Institute. “North Korea’s fuel prices are stable likely because of this illegal activity.”

Go Myong-hyun, a research fellow at the Asan Institute for Policy Studies, wrote in the 2019 Asan International Affairs Outlook published in December 2018 that the supply of fuel in North Korea through maritime transshipment equalled between 236,818 to 355,228 tons in 2018. This estimate is at least 70,000 tons over the limit stipulated by international sanctions.

The UN Security Council Sanctions Committee on North Korea’s website states that the amount of refined oil imported by North Korea in 2018 was 47,872 tons. This means that North Korea imported around five to seven times more fuel than permitted by the sanctions. The Asan report suggested that illegal transshipment allowed North Korea to meet 45% to 67% of its domestic demand for fuel.

There is also the possibility that a reduction in domestic demand for fuel led to the fall in fuel prices. The United Nations organization Comtrade, which provides statistics on international trade, stated that China’s trade with North Korea totaled 2.43 billion USD, a 51.4% fall compared to the same period last year.

“Goods are not making it to the local markets,” said a South Pyongan Province-based source. “There are still vehicles on the road, but the amount of goods being moved around has definitely fallen.”

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