SEOUL, July 27 (AJP) - President Lee Jae Myung said South Korea should maintain its ceiling on petroleum prices until instability in the oil market has clearly subsided, signaling that the emergency measure will remain a central part of the government’s response to renewed tensions in the Middle East.
“I ask that the petroleum price ceiling remain in place until instability in oil prices has clearly been resolved, and that policy tools such as fuel-tax reductions be maintained to the greatest extent possible,” Lee said while presiding over a virtual meeting of senior presidential secretaries from Brasilia on Sunday.
Lee, who is in Brazil on a state visit, said international oil prices were fluctuating again as security conditions in the Middle East deteriorated and warned that volatility could persist for some time. He instructed government ministries to consider additional measures to ease the burden on households and businesses should conditions worsen.
The president specifically called for assistance for people whose livelihoods depend heavily on diesel, including truck drivers, construction-equipment operators, farmers, fishermen and mobile workers.
He also ordered authorities to intensify their monitoring of hoarding, price-fixing and other practices that could disrupt the market, saying businesses should not be allowed to exploit a period of economic hardship for illegal profit.
South Korea introduced its petroleum price-ceiling system on March 13 to curb a surge in domestic fuel costs following the outbreak of conflict involving the United States and Iran. It marked the country’s first direct ceiling on petroleum prices since the oil market was liberalized in 1997.
The ceiling applies to prices charged by refiners when supplying gasoline, diesel and kerosene to gas stations and distributors. It does not directly regulate the retail prices displayed at gas stations. When the measure was introduced, the government said the ceiling would be calculated using changes in international petroleum-product prices and adjusted periodically.
The government’s eighth price ceiling, which took effect Saturday and will remain in force for four weeks, was kept unchanged from the seventh round. Refinery supply prices are capped at 1,784 won ($1.22) per liter for gasoline, 1,773 won for diesel and 1,380 won for kerosene.
The seventh ceiling had been lowered by 150 won per liter in late June after international oil prices declined following an agreement intended to ease the U.S.-Iran conflict. The reduction was expected to pull average retail fuel prices down from slightly above 2,000 won per liter into the 1,800-won range.
The outlook has since changed as renewed U.S.-Iran tensions, disruptions around the Strait of Hormuz and threats to shipping in the Red Sea have pushed crude and refined-product prices sharply higher.
Brent crude briefly rose above $100 a barrel last week for the first time in about two months. On Thursday, Dubai crude stood at $90.40 per barrel, Brent at $96.78 and West Texas Intermediate at $89.31, each roughly $10 higher than a week earlier.
The government said earlier this month that domestic refiners had secured crude-import volumes for July and August equal to or greater than the amount brought in during the corresponding period last year, limiting the immediate risk of a domestic supply shortage. Authorities nevertheless said they were preparing alternative supplies and seeking to diversify import routes in case the conflict is prolonged.
Alongside the price ceiling, the government has extended temporary fuel-tax reductions by two months through the end of September as part of efforts to contain living costs. The reductions had been scheduled to expire at the end of July.
Lee also called for tighter management of prices for other essential goods as the summer vacation season begins, urging officials to pay closer attention to low-income households struggling with both extreme heat and rising living costs.
He said the government should accelerate fiscal, tax and financial measures intended to direct liquidity toward small businesses and neighborhood commercial districts, stressing that the benefits of economic recovery should not remain concentrated in a limited number of sectors or income groups.
Copyright ⓒ Aju Press All rights reserved.