The South Korean government will extend its fifth petroleum price cap for another two weeks starting Thursday, keeping wholesale prices of gasoline, diesel, and kerosene unchanged, the Ministry of Trade, Industry and Energy (MOTIE) said Wednesday. The move aims to minimize domestic price volatility as international oil prices swing sharply amid ongoing negotiations between the United States and Iran. A "Maximum Price Settlement Committee" to calculate compensation for refiners' losses stemming from the cap will be launched this month.
"We decided to freeze the maximum price again, taking into account that rising oil prices lead to higher costs for logistics, services, and production," Vice Industry Minister Moon Shin-hak said at the Government Complex Sejong on Wednesday. Under the extension, the ceiling prices per liter will remain at 1,934 won for gasoline, 1,924 won for diesel, and 1,530 won for kerosene until midnight on the 22nd. The caps, first set with the second phase of the price ceiling system on March 27, will have held for eight consecutive weeks.
The government opted to freeze the cap because international oil prices, despite sharp swings driven by the Middle East conflict, have been hovering between $100 and $110 per barrel on a weekly average basis. "We are now focusing on cumulative upward pressure rather than weekly fluctuations in international prices," a MOTIE official said. "Without the price ceiling, gasoline and diesel would now cost 2,200 won and 2,500 won per liter, respectively."
MOTIE also decided to form the Maximum Price Settlement Committee this month to compensate refiners for losses from the price cap. The government had initially planned to let each refiner calculate cost-based losses with external auditors before forming the committee to determine settlement amounts. The launch appears to have been moved up as the government and the industry clashed over settlement criteria. The industry argues that losses should be calculated based on international product prices rather than production costs.
The government is also pushing to secure alternative crude oil supplies. According to MOTIE, alternative volumes secured for May through July total nearly 210 million barrels. "We are thoroughly monitoring implementation after dispatching special envoys to the United Arab Emirates (UAE) and Kazakhstan," a MOTIE official said. "The alternative volume secured for May through July stands at about 80 percent of typical levels." The government will also secure more than 33 million additional barrels of Canadian crude annually under the free trade agreement (FTA) with Canada. Despite the FTA, Korean importers have been paying a 3 percent tariff due to difficulties proving origin, an issue the government is now moving to resolve.
The government is also stepping up efforts to prevent hoarding and sales refusals that could arise under the price cap system. Deputy Prime Minister and Finance Minister Koo Yun-cheol chaired the eighth meeting of the Special Task Force on People's Livelihood Prices at the Government Complex Sejong on Wednesday, announcing that the ban on petroleum product hoarding, originally set to expire on the 12th of this month, will be extended by two months until July 12. "We will ensure there are no irregularities such as sales refusals under the pretext of the price cap," Koo said. The government will also pursue institutional improvements, including the introduction of new fines and the use of a reward system, to strengthen the effectiveness of the anti-hoarding measures.
