South Korea Freezes Maximum Oil Prices for 5th Term to Ease Public Burden

The South Korean government has once again stepped in to shield its citizens from the volatility of global oil markets by extending the freeze on maximum petroleum prices. This latest measure, effective from May 8 to May 21, keeps the price caps for gasoline, diesel, and kerosene at their current levels. The Ministry of Trade, Industry and Energy emphasized that this decision is a crucial "breakwater" protecting the public from the "waves of international oil price shocks."

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The petroleum price cap system is playing the role of a breakwater protecting the public from the waves of international oil price shocks.

Officials highlighted that this move is a direct response to the recent surge in consumer prices, which saw the consumer price index rise by 2.6% year-on-year in April, the highest in 21 months. The government estimates that without its intervention, the inflation rate could have climbed to 3.8%. The price caps are particularly vital for gasoline, a significant component of consumer spending, and for diesel and kerosene, which directly impact the production and logistics costs for truck drivers, delivery workers, and agricultural and fishing communities.

The government also reaffirmed its commitment to fully compensate oil refiners for losses incurred due to the price cap system, based on 100% of their production costs. While refiners had previously expressed concerns about the complexity of calculating these losses, the ministry assured that cost calculations are feasible through financial statements. A settlement committee comprising legal, accounting, and oil industry experts will be established in May to begin discussions, with loss compensation applications to be accepted from late June.

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We have frozen the maximum price, prioritizing the stabilization of people's livelihoods amid a difficult economic situation due to price increases.

This proactive stance by the government underscores its priority on stabilizing the cost of living for its citizens. By maintaining these price controls, South Korea aims to mitigate the impact of global economic uncertainties on its domestic economy and ensure essential fuel remains accessible.

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Maintaining prices is essential as gasoline has a large share in consumer prices, and diesel and kerosene are directly linked to the production and logistics costs of freight and delivery workers and farmers and fishermen.