South Korea is considering lowering its government-imposed oil price cap after global crude prices retreated to prewar levels, a move officials said on June 26 is intended to accelerate declines in retail fuel prices and ease pressure on household budgets.
According to the Ministry of Trade, Industry and Energy, Brent crude futures were trading at $73.14 a barrel, nearly returning to the $72.48 level recorded before the Middle East conflict. West Texas Intermediate slipped below $70 a barrel to $69.92, while Dubai crude fell to $67.29, below its prewar price
The ministry attributed the decline to expectations of stronger crude supplies from the Middle East, including improving prospects for shipments through the Strait of Hormuz.
Despite the sharp drop in global oil prices, South Korean motorists have seen little relief at the pump.
The nationwide average gasoline price remained around $5.60 a gallon, while diesel averaged approximately $5.57 a gallon, holding near those levels since April. Before the conflict, retail fuel prices generally ranged between $4.20 and $4.50 a gallon.
Officials said the disconnect largely reflects a lag in the domestic fuel supply chain, as gas stations typically replenish inventories every two to three weeks and must first sell higher-cost fuel purchased before wholesale prices declined.
The government also believes the current oil price cap, introduced to shield consumers from surging energy costs, may now be slowing the pass-through of lower crude prices.
Seoul imposed the wholesale price ceiling on March 13 after oil prices surged during the Middle East conflict, limiting the prices refiners could charge gas stations. The cap was last revised on March 27 and has remained unchanged for nearly three months.
Officials now view the measure as having shifted from protecting consumers against rising prices to limiting how quickly lower global crude costs reach retail fuel markets.
The government is weighing a reduction in the wholesale price ceiling to encourage faster declines in pump prices and reinforce broader efforts to contain inflation.
President Lee Jae Myung said on June 25 that the government should move quickly with “more aggressive measures,” including adjustments to the oil price cap, to stabilize fuel prices and reduce the burden on households.
Industry Minister Kim Jung-kwan said on June 22 that oil prices have largely retreated from wartime highs and that the government is reviewing whether conditions now justify lowering the price ceiling.
