The government will ease regulations to allow more discount stores to operate gas stations, hoping greater competition will help curb fuel price inflation, the Ministry of Knowledge Economy said Monday.

The government is also seeking to cut taxes on diesel while raising rates on liquefied petroleum gas to reduce their price gaps, the ministry and state-run Korea National Oil Corp. said.

The benchmark Dubai Crude Oil topped $90 per barrel last week, pushing up the average price of gasoline in Korea to around 1,800 won ($1.5) per liter.

The ministry said discount stores in cities with a population of more than 500,000 will be allowed to run gas stations.

“We expect that more gas stations at discount stores will contribute to lowering oil price in the country,” a ministry official said.

“Yet as the ripple effect of such a measure on other gas stations is projected to be big, we are planning to carry it out gradually, starting with larger cities.”

The government introduced a new regulation in 2009 to permit large retailers to operate gas stations.

Currently, there are nine such facilities owned by Lotte Shopping and Shinsegae Corp., typically selling oil 60 to 70 won cheaper per liter than ordinary gas stations.

Their price competitiveness strongly appeals to drivers. But because of strong resistance from gas station owners and municipalities, the government has limited their location to metropolitan cities.

The government is also seeking to adjust fuel tax rates on diesel and LPG to create a balance of price between the two, the ministry said. The current tax rates on the former and latter stand at 85 percent and 50 percent of that on gasoline, respectively.

The ministry has been attributing such differential tax rates to the damage diesel incurs to the environment.

Yet as the cleanness of diesel has been significantly improved over the years, there has been a need for the government to alter the fuel tax rates, ministry officials said.

In a separate event, the ministry said Tuesday that it has adopted a bill to require gas stations to locate price banners where they can be easily seen by drivers.

As more than 60 percent of consumers choose a gas station according to price reasons, the low visibility of the gas stations’ price banners have been causing inconvenience for consumers, it said.

By Koh Young-aah (youngaah@heraldcorp.com)