Gov't: Oil Price Cap Didn't Spur Overconsumption; Sales Declined

The South Korean government has actively pushed back against assertions that its oil price cap policy is inadvertently fueling excessive consumption. In response to criticisms suggesting that the price controls, implemented following the Middle East conflict, have encouraged overspending on energy, the Ministry of Trade, Industry and Energy released sales data to clarify the situation. Yang Ki-wook, head of the ministry's Industrial Strategy and Trade Office, presented figures at a press briefing indicating that overall sales of gasoline and diesel at gas stations have actually declined when compared to the same period last year.

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It seems inappropriate to conclude that oil product sales and consumption have increased due to the price cap, based only on the data from the first and fourth weeks of March.

The data revealed that during the seven-week period from the fourth week of February to the second week of April, weekly sales of both gasoline and diesel decreased in five of those weeks. Sales only saw a temporary increase in two weeks (the first and fourth weeks of March). Notably, in the period following the introduction of the oil price cap on March 13th, specifically from the third week of March to the second week of April, nationwide sales of gasoline and diesel dropped by 1.8% and 7.6%, respectively, compared to the previous year. A comparison between the first week of March and the second week of April showed even steeper declines: 13.8% for gasoline and 10.1% for diesel.

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We will disclose sales information to the maximum extent possible so that objective judgments can be made.

Yang emphasized that concluding that the oil price cap has boosted consumption based solely on the sales increases in the first and fourth weeks of March would be inappropriate. He assured transparency, stating, "We will disclose sales information to the maximum extent possible so that objective judgments can be made." This defense appears to be partly in response to President Lee Jae-myung's remarks at a cabinet meeting on April 14th, where he acknowledged "counterarguments that consumption has actually increased" since the price cap was implemented. With international oil prices trending upward due to ongoing tensions between the US and Iran, the upcoming announcement of the fourth oil price cap on April 23rd is likely to see an increase, following a freeze in the third announcement which had factored in a tentative ceasefire and falling global oil prices.

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There are counterarguments that consumption has actually increased (due to the oil price cap).