Ruling Party and Government Move to Secure Priority Purchase of 6.86 Million Barrels Stockpiled by Foreign Refiners

The Democratic Party of Korea (DPK) and the government decided on the 10th to push not only for the imminent designation of a maximum price for petroleum products in response to the oil price surge caused by the Middle East crisis, but also for a plan to secure priority purchase of 6.86 million barrels of crude oil stockpiled in Korea by foreign refiners.
The DPK and the government held the first meeting of the "Task Force on Economic Response to the Middle East Crisis" at the National Assembly of the Republic of Korea on the same day and discussed these response measures.
First, the government will soon issue a public notice setting a maximum price for petroleum products, a step that President Lee Jae Myung personally signaled in advance. Authorities will also call on refiners and gas station operators to refrain from raising prices and will launch special inspections to root out illegal oil distribution practices, such as the sale of fake fuel and short deliveries.
In addition to diversifying supply chains to secure crude oil, the government will consider exercising its right of first refusal on 6.86 million barrels of crude that foreign refiners have stored at domestic facilities. Under existing contracts, the government holds priority purchase rights for crude oil stored in domestic stockpiling bases.
Financial measures are also being prepared to address the direct hit that exchange rates and the stock market have taken from heightened risks in the Middle East. A key element is the "Three Currency Stabilization Bills," which DPK leader Jung Chung-rae earlier indicated would be brought to a plenary vote at the National Assembly of the Republic of Korea on the 19th.
The three bills include an amendment to the Restriction of Special Taxation Act that centers on granting capital gains tax deductions to individual investors on overseas stock investments. They also comprise an amendment to the Special Rural Development Tax Act to exempt overseas stock capital gains from the special rural development tax, and an amendment to the National Pension Act to allow the National Pension Service (NPS) to issue foreign-currency bonds. In addition, the government is preparing an asset management framework that will adjust the NPS asset portfolio and foreign exchange hedging ratios to reflect market conditions.
Meanwhile, some observers expect that a System Marginal Price cap system (SMP cap system) could be proposed to counter upward pressure on electricity prices stemming from higher fuel costs. The system was previously introduced in 2022, when international fuel prices surged due to the Russo-Ukrainian War.
gowell@fnnews.com Kim Hyeong-gu Reporter