South Korea to Review Ending Fuel Price Cap if Crude Falls Below $100 a Barrel

Government Specifies Conditions for Ending Fuel Price Cap for First Time

South Korea’s Ministry of Trade, Industry and Energy said it will review lifting its fuel price cap if international crude prices fall below $100 a barrel. It is the first time the ministry, which oversees the measure, has laid out specific conditions for ending the cap.

Yang Ki-wook, head of industrial and energy security at the ministry, made the remarks at a daily briefing of the government’s Middle East response headquarters at the government complex in Sejong on May 14. He said the cap would be lifted before gas station supply prices fall below the ceiling if the situation in the Strait of Hormuz stabilizes and oil prices become more predictable. While the outlook remains uncertain, crude would likely need to fall below $100 a barrel and into the $90 range, even if it does not return to prewar levels, he added.

Before the war, international crude traded at about $60 to $70 a barrel. Prices then surged after the Strait of Hormuz was blocked amid the conflict in the Middle East. As of May 13, Brent crude traded at $105.63 a barrel and West Texas Intermediate stood at $101.02.

The ministry has consistently signaled that it intends to end the price cap, which was introduced to curb inflation, as soon as possible. Industry Minister Kim Jung-kwan told reporters on April 27 that the cap was an undesirable policy but had become unavoidable to stabilize oil prices. He said the government would end the measure as quickly as possible once the war is over and oil prices stabilize. Yang also said on May 14 that the cap is not intended to remain in place for the long term.

Park Jong-gwan, Hankyung.com reporter, pjk@hankyung.com