Government Postpones Seventh Maximum Oil Price Designation... Extends Current Sixth Price

Gasoline at KRW 1,934, Diesel at KRW 1,923, and Kerosene at KRW 1,530 to Remain for Now
"Seventh Decision to Be Made After Assessing Hormuz Situation"
Initiating Development of Financial Support Criteria for Refiner Loss Compensation
Compensation

On the 3rd, amid the sharp statements by U.S. President Donald Trump causing international oil prices to surge, a gasoline and diesel price notice is displayed at a gas station in Yongsan District, Seoul. April 3, 2026. Photo by Dongju Yoon

The government has decided to postpone the previously scheduled seventh round of maximum price designation and instead extend the current sixth round. The plan is to determine whether to maintain or end the maximum price system after confirming the reopening of navigation in the Strait of Hormuz and the stabilization of international oil prices. In addition, the government has begun establishing criteria for financial support to compensate the oil refining industry for losses incurred under the maximum price system. However, since the compensation amount will be calculated based on actual costs rather than the Mean of Platts Singapore (MOPS) international oil product price standard requested by the refining industry, debates over the scale of loss compensation are expected to continue.

"Decision on Whether to Maintain or End the Maximum Price System to Be Made Soon"

Yang Kiuk, Policy Chief of the Ministry of Trade, Industry and Energy, stated at a briefing by the Middle East War Response Headquarters on the 18th, "We have decided to maintain the current sixth-round maximum price," adding, "The decision on whether to designate a seventh-round maximum price will be made after monitoring developments such as the reopening of navigation in the Strait of Hormuz and the overall trend of international oil prices."

Accordingly, the current sixth-round maximum prices—1,934 won per liter for gasoline, 1,923 won for diesel, and 1,530 won for kerosene—will remain in effect for the time being.

Yang explained that the decision to extend the sixth-round measures without designating a seventh round was aimed at "maintaining flexibility." Announcing the seventh-round prices according to the existing method would signal to the market that current prices will be maintained for at least two more weeks, but given the rapidly changing situation in the Middle East, the government intends to keep open the possibility of an early termination.

Yang stated, "The agreement to reopen navigation in the Strait of Hormuz has taken effect as of today," and added, "We expect to be able to assess the situation between this weekend and early next week."

However, he remained cautious regarding the timing for ending the maximum price system. He said, "The normalization of navigation in the Strait of Hormuz is the top priority," and continued, "We will make a decision after comprehensively reviewing international oil price trends, domestic oil price levels after lifting the maximum price system, the fiscal burden, and the impact on people's livelihoods."

He further noted, "The government will only consider ending the maximum price system if it determines that domestic oil prices are unlikely to fluctuate significantly from the current levels after the system is lifted."

"Refiner Loss Compensation to Be Calculated Based on Actual Costs"

The government has also established the criteria for loss compensation to the refining industry resulting from the implementation of the maximum oil price system. On this day, the Ministry of Trade, Industry and Energy issued an administrative notice for the draft of the "Financial Support Regulations for Loss Compensation Due to the Designation of Maximum Oil Sales Prices." This notice details the specific standards for providing financial support to refiners, importers, and sellers who incur losses due to the maximum price system, in accordance with the Petroleum Business Act.

According to the notice, the standard amount for financial support will be determined by the Minister of Trade, Industry and Energy, based on the costs incurred by refiners to produce and sell oil products subject to the maximum price designation. An appropriate profit margin may also be considered in this process.

Costs include not only the price of crude oil, transportation fees, insurance premiums, and incidental expenses, but also depreciation, labor costs, fuel costs, and domestic distribution expenses—essentially, all expenses incurred during the production and sales processes. Yang explained, "Actual expenditures will be reflected in the cost calculations," and added, "Even if a particular expense is not explicitly listed in the notice, there is flexibility to recognize related costs if necessary."

However, the government did not accept the refining industry's request for compensation based on the Singapore international oil product price standard, known as MOPS. Yang stated, "What refiners wanted was for the government to recognize the difference between international oil product prices and domestic prices," and explained, "The government’s approach is to start from the import cost, add incidental, production, and sales expenses from the bottom up, and then factor in an appropriate margin." He further clarified, "The MOPS price, which refiners hoped for, has not been reflected."

As a result, the gap between the government and the industry regarding the scale of loss compensation is expected to widen. Some in the refining industry have claimed that losses following the implementation of the maximum price system amount to between 3 trillion and 4 trillion won, but the government believes these estimates are based on the MOPS standard. Yang commented, "The 3 to 4 trillion won figure cited by refiners is likely calculated using the MOPS standard," and added, "We expect the actual cost-based figure under government review to be lower than that."

The government believes that the currently allocated loss compensation budget of 4.2 trillion won is sufficient to respond to the situation for now. Yang stated, "The 4.2 trillion won figure was simulated based on past Dubai crude prices and domestic oil price trends," and added, "Given the current situation, we estimate that the loss compensation budget will not be insufficient." However, the actual compensation amount will be finalized after refiners submit cost data and a review by the Settlement Committee.

Financial support will be settled on a quarterly basis. The initial settlement period will run from the date the maximum price was first designated until the end of the month three months later. Refiners must apply for financial support within 60 days after the end of the settlement period, and if necessary, the deadline can be extended by up to 30 days. The Ministry of Trade, Industry and Energy plans to consult with the industry regarding the scope and standards for submitted data in July and proceed with the settlement process as quickly as possible.

A Maximum Price Settlement Committee will also be established to review the scale of loss compensation. The committee will be comprised of up to 20 experts in accounting, law, the oil market, and government officials, and will review cost calculations, appropriate profit margins, application document verification, payment decisions, and payment amounts. However, the Settlement Committee is a deliberative body, not the final decision-making entity. The final decision on support and the amount will be made by the Minister of Trade, Industry and Energy in accordance with the Petroleum Business Act.

Yang stated, "While the Settlement Committee will conduct an objective review, the legal authority to decide on financial support rests with the Minister of Trade, Industry and Energy," and added, "However, it is highly unlikely that the minister would make a decision completely unrelated to the committee’s review." The names of the committee members will not be disclosed during the review period to ensure the independence and fairness of the process.

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