Rising Middle East Tensions: Maximum Price System Maintained, Ban on Hoarding DEF Extended

Task Force for Special Management of Livelihood Prices Convenes on July 24
Fuel Tax Cut Extended by Two Months Until End of September
Controls on Syringe Hoarding to Be Eased
Egg and Mackerel Supply Expansion to Continue

As uncertainty grows due to escalating tensions in the Middle East, the government has decided to maintain the petroleum price ceiling system. The fuel tax reduction, which was set to expire at the end of this month, will also be extended until September. The ban on hoarding urea solution and urea will likewise be continued. To stabilize food prices, the government will expand imports of eggs and mackerel.

A gas station in Yongsan-gu, Seoul. Photo by Dongju Yoon

On July 24, the government held a meeting of the "Special Task Force on Essential Commodity Price Management" at the Government Complex in Seoul, presided over by Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-cheol, and announced these price stabilization measures.

First, the government decided to extend the petroleum price ceiling system, which had previously been under consideration for phased abolition. Taking into account market conditions such as international crude oil prices and the public’s economic burden, the government will determine the eighth maximum price and implement it starting at midnight on July 25.

To reduce the public’s fuel costs, the current level of fuel tax reduction will also be extended for two more months, until September 30. The government had already expanded both the duration and extent of the fuel tax cuts as of March, increasing the petrol tax reduction rate from 7% to 15% and the diesel tax reduction rate from 10% to 25%. As a result, per-liter prices are expected to continue to decrease by 122 won for gasoline and 145 won for diesel. The fuel tax is a tax that refiners pay to the state when releasing petroleum products from the factory. Reducing this tax helps prevent increases in consumer prices. A government official explained, "Given the unresolved instability in the Middle East, we need to retain flexibility to adjust the fuel tax to respond to potential volatility in oil prices in the future."

To compensate refiners for losses incurred from the price ceiling, the Maximum Price Settlement Committee will also be activated. According to a government official, "The committee will review costs based on import prices and determine a reasonable compensation amount."

The ban on hoarding urea solution and urea, which had been scheduled to expire on July 31, will be extended for one more month until August 31. The domestic supply situation remains stable for now. Domestic urea inventories, including both public reserves and private holdings, are at normal levels. With China allocating 1.5 million tons for export at the end of May, import conditions are expected to improve as well. A government official stated, "We will consider further extensions depending on the course of the conflict in the Middle East and the supply and demand conditions for urea and urea solution."

However, the criteria for the hoarding ban on syringes and needles, for which the supply and demand situation has improved, will be relaxed. The allowable inventory limit, which had been capped at 150% of the previous year’s sales volume, will be increased to 200%. The sales volume restriction will be lifted entirely. This adjustment is intended to prevent a contraction in production due to increased inventory levels at manufacturers. These measures will apply until August 31. A government official explained, "In the case of syringes, as speculative demand has declined and imports have increasingly substituted for domestic products, supply and demand have remained stable."

To address the sharp rise in food prices, the government will continue to expand supply and implement discount policies for eggs and mackerel. By August 10, a total of 49.37 million eggs contracted for import will be brought in, with an average weekly supply of 20 million eggs until early August. The government will diversify its import sources from the United States to countries such as New Zealand and Poland, while also providing funding to stabilize domestic production. This includes supporting 370 billion won for farm expansion and renovation costs, as well as allocating 20 billion won in pilot funding for facilities and operating capital to help private sector stockpiling of processed egg products in the event of oversupply. For mackerel, Korea will directly import an additional 1,200 tons from the United Kingdom and Norway, and will continue efforts to diversify import sources through business consultations with the Chilean government.

The government also plans to announce a "Chuseok Essential Commodity Stabilization Plan" in September, which will include additional price stabilization measures.

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