S. Korea mulls adopting oil price cap system for 1st time in 30 years
Seoul, March 8
The government is considering adopting a price cap system for oil for the first time in nearly 30 years, sources said on Sunday, amid concerns over rising energy prices following the escalating conflict in the Middle East.
Officials began reviewing the possibility after surging global crude prices were reflected almost immediately in domestic fuel prices, rather than after the typical two-week lag, following U.S.-Israeli strikes on Iran and Tehran's retaliatory attacks in the region.
South Korea, which depends heavily on energy imports, is particularly vulnerable to external price shocks, which often drive inflation, reports Yonhap news agency.
The review is being conducted under Article 23 of the Petroleum and Alternative Fuel Business Act, which allows the industry minister to designate a maximum sales price when oil prices fluctuate sharply and threaten economic stability.
However, the provision has effectively remained dormant since the country liberalised oil prices in 1997.
Sources said the government is weighing the option carefully because of potential side effects, including market distortions and fiscal burdens.
While presiding over an extraordinary Cabinet meeting Thursday to discuss the U.S.-Israeli strikes on Iran, President Lee Jae Myung ordered officials to swiftly devise a price cap system by region and fuel type if implementing a nationwide uniform cap proves difficult. The following day, Lee also warned oil refiners against possible collusion in raising gasoline prices.
Following the president's directive, the government launched an interagency inspection team to crack down on illegal oil distribution and hoarding, as well as unfair trade practices.
In addition, the government decided to secure more than 6 million barrels of crude oil from the United Arab Emirates to stabilize energy supplies.
Despite such measures, however, gasoline prices at domestic gas stations continue to rise.
The average gasoline price exceeded 1,890.87 won (US$1.27) per liter as of Saturday night, according to data from the Korea National Oil Corp.
— IANS
Reader Comments
Interesting to see a country revisiting a policy after 30 years. It shows how global conflicts in the Middle East directly affect all of us. Hope they manage the side effects like market distortion. We need stable energy prices for economic growth everywhere.
Price caps sound good on paper, but they often lead to shortages or lower quality. The article says it's been dormant since 1997 for a reason. Government intervention should be minimal. Let the market adjust. Better to focus on securing supply like they did with UAE.
The President warning refiners against collusion is key. In India too, we sometimes wonder if price hikes are coordinated. Strong oversight is needed alongside any cap. Hope the inspection team is effective.
$1.27 per liter! That's roughly ₹106. We are paying much more than that in many Indian cities. While a cap might help, long-term solution is renewable energy and reducing import dependency. Jai Hind!
A respectful criticism: The article mentions "potential side effects" but doesn't detail the fiscal burden. Who pays for the cap? Taxpayers? The government? Transparency is crucial for public support. Hope they have a clear funding plan.
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.