S. Korean President Urges Fuel Price Cap as Oil Jumps Near $120

Lee Jae Myung Photographer: Tina Hsu/Bloomberg Photo by Tina Hsu /Bloomberg

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(Bloomberg) — South Korean President Lee Jae Myung called for the quick launch of a cap on fuel prices as the government moves to contain a spike in energy costs triggered by escalating conflict in the Middle East. 

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Authorities should “swiftly introduce and boldly implement the maximum fuel price system” to curb excessive price increases, Lee told officials during an emergency economic meeting Monday.

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Lee’s remarks came as global oil prices surged toward $120 a barrel, the highest level since 2022, amid mounting supply risks. Oil suppliers in the Middle East have lowered output, the Strait of Hormuz remains effectively closed, and the US has threatened to escalate a conflict that has already roiled energy markets.

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South Korea imports almost all of its energy supplies, with about 70% of its oil cargoes typically shipped through the vital strait. The move to impose a price cap — the first time such a measure will have been used in nearly 30 years — is part of a broader effort to stabilize domestic energy markets as geopolitical tensions disrupt supply chains.

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According to Korea National Oil Corp., the average retail gasoline price at service stations was 1,895.32 won ($1.27) per liter on Sunday, up about 12% from 1,692.89 won on Feb. 28 as the US began its airstrikes on Iran.

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On Sunday, Industry Minister Kim Jung-kwan said the government could implement the fuel price cap quickly if market conditions deteriorate.

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“We have almost finished preparations,” Kim told reporters after returning from a trip to the US. “We plan to monitor market conditions and respond accordingly.”

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The initial response will be a release from the country’s strategic oil reserves. These stand at about 100 million barrels or enough to cover more than 210 days of consumption, the Ministry of Trade, Industry and Resource said in December.

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Separately, Kim convened an emergency meeting with domestic refiners and industry groups to review local fuel prices, warning companies against exploiting the surge in global crude prices.

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“The government will hold accountable anyone who makes attempts to take advantage of rising global oil prices in ways that undermine our efforts to stabilize consumer prices,” Kim said.

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Seoul is also preparing contingency measures to stabilize supply after petrochemical supplier Yeochun NCC Co. declared force majeure last week due to disruptions in naphtha imports following the Middle East turmoil. Kim said on Sunday the company, which relies more heavily on petrochemical feedstock rather than integrated refining operations, appears more vulnerable to supply disruptions.

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Officials are reviewing the situation and will soon announce measures related to naphtha supply, the minister added. 

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South Korea has also been seeking to diversify supplies and secure alternative cargoes from regions outside the Middle East. The UAE last week offered crude shipments that would bypass the Strait of Hormuz.

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—With assistance from Soo-Hyang Choi.

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