Gasoline Prices Near 2,000 Won... Will Tough Measures on Price Caps and Collusion Work? [US–Iran War]

Amid the shock from the Middle East crisis, the average gasoline price at gas stations in Seoul is approaching 2,000 won per liter, prompting the government to roll out a series of strong measures. In addition to invoking a maximum price designation system—an emergency tool that has been virtually dormant for the past 30 years—the government is also examining whether gas stations are engaging in price collusion, raising the level of pressure. Attention is now focused on whether these tough steps will be enough to rein in soaring fuel prices.
Cheong Wa Dae spokesperson Kang Yu-jeong announced in a media notice on the 8th that President Lee Jae Myung will preside over an emergency economic inspection meeting on the morning of the 9th to review the economic and price situation in connection with developments in the Middle East. The meeting is expected to be attended by the Ministry of Finance and Economy, the Ministry of Trade, Industry and Resources (MOTIR), the Ministry of Climate, Energy and Environment, the Ministry of Planning and Budget, the Ministry of Agriculture, Food and Rural Affairs (MAFRA), the Korea Fair Trade Commission (KFTC), and the National Tax Service of South Korea, among others.
The meeting is likely to review possible fluctuations in international oil and raw material prices stemming from heightened tensions in the Middle East, as well as the resulting impact on domestic inflation and industry, and to discuss response measures. In particular, the rapid surge in fuel prices since the onset of the Middle East crisis is expected to be a key agenda item.
According to Opinet, the oil price information service run by Korea National Oil Corporation (KNOC), as of 3 p.m. that day the average retail gasoline price at gas stations nationwide stood at 1,894.86 won per liter, while diesel was 1,917.34 won. Compared with the previous day, gasoline rose by 5.46 won and diesel by 6.79 won. Fuel prices are still climbing, but the pace of increase has dropped sharply compared with two days earlier. Between the 6th and 7th, immediately after the Middle East crisis erupted, gasoline prices jumped 14.93 won per liter in a single day, and diesel soared by 19.71 won.
The slowdown in fuel price increases is seen as the result of the government’s all‐out pressure and market management measures. Above all, it appears significant that President Lee ordered the use of the maximum price designation system. In practice, the government has begun working‐level reviews for announcing a maximum oil price designation, based on Article 23 of the Petroleum and Alternative Fuel Business Act. However, there are signs of caution over whether to actually apply it. If the government intervenes in the market to forcibly suppress prices, refiners and gas stations could see their profitability deteriorate, potentially leading them to cut supply volumes or avoid sales altogether, creating a supply crunch. In addition, Article 23 of the Petroleum and Alternative Fuel Business Act allows the state to compensate businesses for losses incurred under price controls, meaning that if high oil prices persist, the government may have to cover private‐sector deficits with tax money, posing a heavy fiscal burden.
Alongside the possible introduction of maximum prices, the government has also targeted unfair trade practices for intensive crackdowns. A pan‐government joint inspection team is examining illegal oil distribution, hoarding, and the sale of fake or blended fuels. The Korea Fair Trade Commission (KFTC) is investigating whether gas stations have engaged in price collusion, and the Ministry of Justice has instructed the Supreme Prosecutors' Office of the Republic of Korea (SPO) to respond firmly to oil price collusion and other market‐distorting acts.
The government is also seeking voluntary cooperation from the industry. Under strong government pressure, three major oil‐related associations—the Korea Petroleum Association, whose members include the four domestic refiners; the Korea Oil Distribution Association, representing oil distributors; and the Korea Oil Station Association, representing gas station operators nationwide—announced, "We will cooperate to ensure that increases in international oil prices are not passed on too abruptly to prices at gas stations."
The National Agricultural Cooperative Federation (NACF) has likewise pledged to ease fuel costs felt by farmers and the public as much as possible, committing a total of 30 billion won, including 25 billion won in tax‐free fuel discounts and 5 billion won in discounts at NACF‐operated gas stations.
At the same time, excessive profiteering that harms the community is being condemned as a manifestation of a "get‐rich‐quick" mentality and singled out as something that must be eradicated.
Koo Yun-cheol, Deputy Prime Minister and Minister of Finance and Economy, wrote on social networking service (SNS) that he believes "the recent excessive increases in petroleum prices, tied to the situation in the Middle East, are another example of this get‐rich‐quick mentality." He added, "We will respond firmly so that prices are set at levels consistent with common sense and social norms. Price gouging on petroleum products must be eliminated without fail."
syj@fnnews.com Seo Young-jun, Koo Ja-yoon Reporter