"We will consider cutting oil taxes after a comprehensive study on the reduction's impact to tax revenues and energy strategies," South Korean Prime Minister Kim Hwang-sik said during a government session at the National Assembly.

The country's inflation rate climbed to a 29-month high of 4.7 percent in March.

Seoul also said it was also considering allowing state-owned Korea National Oil Corp. to sell oil products in the domestic wholesale market to boost competition, Yonhap reported.

The government has been critical of pricing policies of the country's four privately owned refiners -- SK Innovation, GS Caltex, S-Oil and Hyundai Oilbank.

While South Korean President Lee Myung-bak has said he would scale back government regulation of the oil industry, the country's inflation concerns may force him to change those plans. But experts say South Korea is unlikely to move toward state-determined pricing schemes.

"I think it's pretty unlikely" that South Korea will move to state-controlled pricing, Alex Yap, an analyst at Facts Global Energy in Singapore told The Wall Street Journal. "(South) Korea is a 100 percent crude importer and any losses from price controls would have to be paid by the companies or the government, through subsidies."

Yap said Seoul might adopt policies that require more transparency for retail pricing or some sort of "anti-collusion measures" to prevent unreasonable price escalations.

"But full price controls like China or India are very unlikely," he said to the Journal.

South Korea's Ministry of Knowledge Economy earlier said it was considering the possibility of using a combination of crude oil purchase prices along with production costs to calculate oil prices, instead of the current pricing method based on the cost of refined products in the Singapore spot market.

"Oil products are usually produced from crude oil shipped about 30 to 45 days earlier, so at times of rising global oil prices, products are produced with crude oil that was imported at a cheaper price than the (latest) market price," the ministry said in a statement.

By using the original crude-oil purchase price as the benchmark, oil product prices could be lowered, it said.

As one of the world's top energy importers, South Korea ranks fifth for oil, with more than 80 percent of its shipments coming from the Middle East.

In February, South Korea consumed about 193,000 barrels of gasoline a day and exported approximately 100,000 barrels a day.

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