Petroleum "Maximum Price System" to Take Effect at Midnight on the 13th... Gasoline Capped at 1,724 Won, Diesel at 1,713 Won (Comprehensive)

Responding to Oil Price Surge Driven by Middle East Crisis

Government Directly Controls Refiner Supply Prices

Minister Kim Jeong-Kwan: "We Will Not Tolerate Price Increases That Disrupt Market Order"

On the 6th, one day after President Lee Jae-myung ordered a strict response against excessive oil price profit, a gas station in downtown Seoul was selling fuel at a price 20 won higher than the previous day (right photo). Earlier, on the 5th, the president held an emergency cabinet meeting and instructed the prompt designation of 'maximum prices' for petroleum products by region and type to curb sharp rises in fuel prices and speculative hoarding. Photo by Yoon Dongju

The government will implement a "maximum price system for petroleum products" starting at midnight on March 13 to stabilize domestic oil prices, which have surged due to the situation in the Middle East. The initial maximum prices have been set at 1,724 won per liter for regular gasoline, 1,713 won for automotive diesel, and 1,320 won for kerosene. These figures are 109 won, 218 won, and 408 won lower, respectively, than the average supply prices submitted by refiners as of March 11.

The Ministry of Trade, Industry and Energy announced on March 12 that the "maximum price system for petroleum products" would take effect at midnight on March 13, following consultations with related ministries. This measure is a response to sharply increased volatility in international oil prices and a rapid surge in domestic oil prices due to the recent situation in the Middle East.

The initial maximum prices have been confirmed at 1,724 won per liter for regular gasoline, 1,713 won for automotive diesel, and 1,320 won for kerosene. For island regions, where maritime transport is essential, the maximum prices will be 1,743 won for regular gasoline, 1,732 won for automotive diesel, and 1,339 won for kerosene.

Kim Jeonggwan, Minister of Trade, Industry and Energy, stated at the 4th meeting of the Special Task Force for Livelihood Price Control that "the aftermath of the situation in the Middle East continues to cause instability in oil prices," and added, "Although domestic gasoline prices have surged by over 200 won since the situation began, fortunately, the trend has started to decline as of yesterday." He continued, "However, it is still too early to be relieved. At a time when we all need to work together to overcome these difficulties, we cannot tolerate repeated actions that disrupt market order."

According to the government, after the developments in the Middle East, international oil prices rose to around $100 per barrel due to concerns over supply instability, and are now fluctuating around $90 per barrel. During the same period, domestic prices have also surged, with gasoline rising by about 200 won per liter and diesel increasing by more than 300 won.

Yang Giuk, Director General for Industrial Resource Security at the Ministry of Trade, Industry and Energy, stated at a briefing on the same day, "Recently, due to the situation in the Middle East, international oil prices have risen to about $100 per barrel, causing a sharp increase in domestic oil prices. To stabilize oil prices and prevent market distortion, we plan to temporarily operate the maximum price system."

The maximum price system sets an upper limit on wholesale prices for petroleum products supplied by refiners to gas stations and dealerships. Once the government sets a "maximum supply price" according to a prescribed formula, refiners cannot raise their prices beyond this limit. However, retail prices at gas stations are excluded from the application of this system, although the government will increase monitoring of these prices.

Minister Kim explained, "By allowing refiners to increase prices within the range of fluctuations in international petroleum product prices for actual supply to gas stations and dealerships, we aim to prevent unreasonable price changes that deviate from global price trends." He further stated, "We will target essential items closely tied to people's livelihoods, such as gasoline, diesel, and kerosene, and restrict the diversion of domestic supply to overseas markets."

This initial maximum price will be applied for two weeks, from March 13 to March 26. The government plans to adjust the maximum prices again on March 27, reflecting domestic and international oil price conditions. When adjusting the maximum price, the "initial maximum price excluding taxes and charges" will be used as the base price, with the increase rate in international petroleum product prices over a certain period added in, and then taxes and charges included to finalize the new maximum price.

To minimize adverse effects from price controls, the government has also established a procedure for compensating refiners for losses. Refiners will calculate losses based on their own cost structures, submit them with verification from an accounting firm, and the government will verify and compensate quarterly through a settlement committee composed of experts. Minister Kim stated, "We will compensate for losses only after strict review and objective verification to avoid excessive fiscal burden."

The government will also separately manage retail prices at gas stations, which are excluded from the maximum price system. Minister Kim said, "We will monitor price and supply flows together with civic organizations and implement a rigorous management system that includes public disclosure, investigation, and legal action for gas stations where price increases are excessive or speculative hoarding is suspected."

Director Yang added, "Although there may be differences depending on the inventory situation at each gas station after the official government notice, we generally expect consumers to feel the effects of price stabilization within two to three days."

Alongside the implementation of the maximum price system, the government also plans to support energy-vulnerable groups. The Ministry of Trade, Industry and Energy is considering additional support measures, such as energy vouchers, for groups burdened by high energy costs, including the self-employed and farmers, in cooperation with related ministries.

This content was produced with the assistance of AI translation services.