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South Korea Implements Temporary Fuel Price Capping System
The South Korean government has commenced the implementation of a temporary fuel price capping system as of last Friday, aimed at mitigating rising costs amid concerns over energy supply due to ongoing tensions in the Middle East.
According to Yonhap News Agency, the decision was announced during a meeting of a ministerial task force appointed to manage market prices, following significant fluctuations in local fuel prices since tensions escalated in the Middle East at the end of last month.
This measure marks the first application of a fuel price capping system in the country since 1997, based on a provision in the Petroleum Business Act that allows the Minister of Industry to set a sales price ceiling when oil prices experience sharp fluctuations threatening economic stability.
Under this system, the government will establish a cap on the prices of petroleum products supplied to gas stations and distributors by refineries. The Ministry of Trade, Industry and Energy stated that the decision covers only refinery supplies, excluding retail prices at gas stations due to regional differences and operational strategies.
The maximum price will be calculated by multiplying the average weekly supply prices of regular gasoline, diesel, and kerosene by the adjustment rate of the Singapore Mean Oil Price (MOPS), along with adding relevant taxes, with this index serving as a benchmark price for oil products in the Asia-Pacific region.
Authorities have set the initial price caps at 1,724 won ($1.17) per liter for regular gasoline, 1,713 won for diesel, and 1,320 won for kerosene.
Yang Ki-wook, the Deputy Minister of Trade, Industry, and Resource Security, explained that the price caps will be reviewed biweekly to align with fluctuations in global oil prices.
This action follows a notable increase in fuel prices since unrest erupted in the Middle East on February 28, with domestic gasoline prices rising by over 200 won per liter and diesel prices by more than 300 won.
The government also plans to impose restrictions on the export of petroleum products included in this system to prevent excessive exports resulting from the price disparity between the domestic and foreign markets, with compensation for any potential financial losses incurred by refineries after the program ends.
