President Lee Considers Policy Shift on Oil Price Cap Amid Consumption Concerns

President Lee Jae-myung has signaled a potential shift in the government's oil price cap policy, acknowledging valid concerns that the measure, intended to alleviate public burden amid soaring global oil prices due to the US-Iran conflict, may have inadvertently spurred increased consumption. During a State Council meeting, the President noted that the price cap has made South Korea's fuel prices among the lowest globally, leading to a counterproductive rise in usage when conservation is critical.

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The argument that capping prices has led to increased oil consumption is valid. We hope you will make every effort to conserve oil.

He pointed out the significant fiscal strain imposed by the policy, where the government covers the difference between production costs and the capped retail price, ultimately funded by taxpayer money. President Lee emphasized that this artificially suppressed price is unsustainable and urged for careful consideration of the financial implications. This statement suggests the administration is contemplating an exit strategy from the price cap, seeking a balance between immediate public relief and long-term economic stability.

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The government has to subsidize the difference between production cost and the actual selling price, which ultimately comes from taxpayer money.

President Lee also called for a national priority on addressing vulnerabilities in the economic and industrial structure exposed by the US-Iran conflict. He proposed prioritizing the development of alternative supply chains, implementing medium-to-long-term industrial restructuring, and realizing a plastic-free economy as key national projects. This broader economic agenda aims to bolster resilience against future external shocks and promote sustainable growth.

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This price is not normal. We are suppressing prices due to the difficulties faced by the public, but taxes are being spent on this.