The skyrocketing national gasoline prices have finally turned downward. This is the first time gasoline prices have dropped since late March when international crude oil prices peaked due to the war involving the U.S., Israel, and Iran.
The government attributed this to the “effectiveness of the oil price cap.” However, voices within the oil industry suggest it’s time to discuss an exit strategy for the price cap.
According to the Korea National Oil Corporation’s price information system Opinet, the national average gasoline price on the 12th was 2011.85 won per liter. This represents a 0.05 won decrease, following the peak of 2011.90 won on the 11th, which was the highest since the outbreak of war on February 28. This marks the first decline in 49 days. By 4 PM on the 13th, the price had fallen by another 0.24 won to 2011.61 won per liter.
The average gasoline price had been rising steadily since March 24 (1818.92 won) through May 11.
Diesel prices show a similar trend. The national average diesel price hit a high of 2006.41 won per liter on the 11th, dropping to 2006.25 won on the 12th and further to 2006.05 won. An industry insider noted, “This should not be seen as a temporary phenomenon but as a trend where prices have peaked and are now declining.”
Regionally, the average gasoline price hit its peak in only 5 out of 17 provinces and cities (Gangwon, Jeonbuk, Jeonnam, Gyeongnam, Sejong) on the previous day. Prices in Seoul started decreasing on the 11th, in Gyeonggi on the 7th, and in Incheon on the 3rd.
The government credits this to the effectiveness of the oil price cap. An official from the Ministry of Trade, Industry, and Energy stated in a phone call, “The implementation of the price cap suggests that petroleum product prices are finally being controlled,” adding, “Especially with the recent freezing of the cap, it appears stability has been achieved.”
The government froze the fifth round of maximum oil prices on the 7th. Since increasing the price cap by 210 won per liter during the second round on March 27, the prices for regular gasoline, diesel, and kerosene have been maintained at 1934 won, 1923 won, and 1530 won, respectively.
However, there are opinions within the oil industry suggesting it is time to discuss the end of the price cap or reviewing and potentially raising the cap to reflect increased costs. There is a rationale that as the government has frozen maximum prices for public stability, a gradual adjustment may be necessary as petroleum product prices stabilize.
A representative from Company A mentioned, “The government has set maximum prices regardless of fluctuations in international oil prices,” and noted, “While it might be difficult to argue for the end of the price cap based solely on gasoline prices, this can serve as a benchmark.” A representative from Company B stated, “The accumulated harm to oil companies and gas stations due to the price cap is surfacing,” adding that front-line gas stations, which have cooperated with the policy, may express dissatisfaction as gasoline prices drop, questioning why the price cap remains unchanged.
An official from the Ministry of Trade, Industry, and Energy remarked, “Immediately lifting the cap due to falling gasoline prices could lead to a price surge.”
Previously, Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol stated regarding the end of the price cap, “We plan to maintain it temporarily until the Middle East situation stabilizes.”