SEOUL, SOUTH KOREA - A TOP South Korean policy maker said on Friday the government may lower taxes on diesel to ease price pressure stemming from record high global oil prices and growing pressure from transportation and auto makers.

'Soaring oil prices are are a big concern...and the government should do something to ease price pressure for those highly dependent on diesel,' vice finance minister Choi Joong kyung said in a speech on Friday.

Truck drivers and bus associations as well as auto manufacturers have demanded the government lower taxes on diesel, threatening strikes otherwise, or fare hikes which would add further pressure to already high inflation.

'Record high oil prices are causing a big headache to the transportation industry... and the auto industry may also have to suspend production of some diesel-powered vehicles on weakening demand,' the Korea Automobile Manufacturers Association said on Thursday, demanding the government lower diesel tax.

It said sales of sport utility vehicles have fallen 18 per cent in the first four months of this year. Earlier this month South Korean SUV maker Ssangyong Motor said it planned to cut SUV output for six weeks due to record oil prices.

South Korea levies 655 won($0.86) per litre in tax on diesel, which amounts to one third of retail prices.

But any reduction in diesel taxes is unlikely to be huge as South Korea, which depends heavily on energy imports to power Asia's fourth-largest economy, wants to keep the tax level relatively high to curb energy consumption.

In April, the country slashed import tariffs on oil products such as gasoline and fuel oil to 1 per cent from 3 per cent but kept import tariffs on crude oil and liquefied natural gas at 1 per cent, turning away from its initial pledge to cut the duties, because of concerns over tax revenue losses.

Oil prices have jumped nearly 40 per cent this year, bolstered by a poor performing US dollar as well as growing fears about the industry's ability to keep pace with demand over the next decade due to stagnating non-Opec production growth.

Soaring fuel costs have triggered a wave of protests around the world, with convoys of trucks converging on London on Tuesday, while in France fishermen blocked road and rail access to the fuel depot of the country's largest oil refinery at Gonfreville, owned by Total.

Cuts in diesel tax by South Korea might have the impact of heading off European-style fuel protests but would be at odds with the approach by other governments in Asia which are trying to damp down demand.

Over the past week administrations in Indonesia, Taiwan, Sri Lanka and Bangladesh have either raised regulated fuel prices or pledged that they will, forced into the action by the unsustainable cost of subsidies. -- REUTERS