According to government sources, the policy review was launched after world crude oil prices soared and almost immediately reflected in domestic retail prices, instead of a delay of about 2 weeks as usual.
This development occurred after attacks by the US and Israel on Iran, along with retaliatory blows from Tehran that shook global oil and gas markets.
As a country heavily dependent on imported energy, South Korea is particularly vulnerable to oil price shocks from outside. Every time energy prices rise sharply, domestic inflation is often under significant pressure.
The consideration of oil price ceilings is carried out according to Article 23 of the Law on Petroleum and Alternative Fuels Business. This clause allows the Minister of Industry to set the maximum selling price when oil prices fluctuate sharply and threaten the stability of the economy.
However, this mechanism has hardly been used since 1997, when South Korea proceeded to liberalize oil prices according to the market mechanism. Therefore, if applied, this will be the first time in nearly three decades that Seoul has reactivated this urgent price control tool.
Sources say the government is considering very cautiously. The oil price ceiling may help curb inflation in the short term, but also contains many implications such as distorting the market, putting financial pressure on the budget or reducing the supply motivation of businesses.
At an emergency cabinet meeting to discuss the Iran war situation last week, President Lee Jae Myung requested functional agencies to quickly develop a plan to impose oil price ceilings. He also proposed studying a mechanism to impose price ceilings by region and type of fuel, in case it is difficult to deploy a unified national ceiling.
A day later, the South Korean leader also warned domestic oil refining companies not to collude to raise gasoline prices, and requested to strengthen surveillance of the fuel market.
Following the President's direction, the government established an inter-sectoral inspection team to tighten gasoline distribution activities, handle speculation, hoarding or unfair commercial practices.
In parallel with market management measures, Seoul is also seeking to increase crude oil supply to reduce price pressure. The government decided to secure more than 6 million barrels of oil from the UAE to stabilize domestic energy supplies.
However, retail gasoline prices in South Korea are still increasing rapidly. According to data from the Korean National Oil Corporation, the average gasoline price at gas stations nationwide exceeded 1,890 won/liter (about 35,000 VND/liter) on the last night of the week.
