Cap on Refiners’ Supply Prices Based on ‘International Price + Margin’... Fuel Price Ceiling to Be Adjusted Every Two Weeks

The government is expected to introduce a fuel price cap system this week that will set an upper limit on refiners’ supply prices based on international crude prices. Authorities are reviewing a plan to use the Singapore spot market price, specifically the Mean of Platts Singapore (MOPS), and add a fixed margin to determine the maximum price at which refiners can sell. Once implemented, this will mark the first direct government intervention in fuel prices in roughly 30 years, since the liberalization of oil prices in 1997.
According to the government and industry on the 10th, the Ministry of Trade, Industry and Resources (MOTIR) has begun the process of establishing a public notice to introduce the fuel price cap system and is working on the detailed design. An official at MOTIR stated, "We are preparing with the goal of implementing it within this week."
Under the approach being considered, the cap on refiners’ supply prices would be calculated by taking the average Singapore spot market price over the past several weeks and adding the exchange rate and a fixed margin. The aim is to reflect international price movements while preventing excessive price hikes during domestic distribution.
A notable feature of the plan is that the government will target refiners’ supply prices rather than retail prices at gas stations. Gas stations across the country operate under various models—company-owned, independently run, and discount stations—and regional cost differences are large, making direct control of pump prices difficult. As a result, setting a ceiling on refiners’ supply prices, which are the starting point of price formation, is being considered a realistic alternative to ease cost pressures on gas stations and curb increases in consumer prices.
The government is also considering adjusting the price ceiling every two weeks. Kim Yong-beom, Chief Presidential Secretary for Policy of the Republic of Korea, said, "We are basically designing the system on a two-week cycle," adding, "There is a possibility that the initial ceiling price will be lower than the prices consumers are currently experiencing."
Supplementary measures will be introduced to prevent supply shortages that could arise from price controls. Through a price-gouging notification, the government is reviewing a plan to require refiners to supply a certain minimum proportion of their output to the domestic market. The measure is intended to block attempts to stockpile fuel or divert volumes to exports in order to circumvent the price cap.
The government also plans to compensate refiners for losses incurred under the fuel price cap system. Article 23 of the Petroleum and Alternative Fuel Business Act stipulates that the state may compensate businesses for losses arising from government-imposed price controls.
Industry players are watching closely to see whether capping refiners’ supply prices will actually help stabilize fuel prices. If prices are constrained at the supply stage, the pace of retail price increases at gas stations could be partially restrained. However, some warn that prolonged price controls could lead to reduced supply or distortions in the market.
Meanwhile, oversight of the fuel market is being strengthened. Starting today, the National Tax Service of South Korea has deployed about 300 personnel from seven Regional Tax Offices and 133 district tax offices nationwide to conduct on-site inspections of illegal fuel distributors. The inspections will focus on undocumented transactions of petroleum products, sham or fabricated transactions, and cases where companies sell at high prices but underreport sales. The National Tax Service will also intensively examine the production and distribution of fake fuel and the illegal diversion of tax-exempt fuel, and will immediately launch tax audits if tax evasion is detected.
aber@fnnews.com Park Ji-young, Seo Young-joon Reporter