Seventh Oil Price Cap Cut by 150 Won; Gasoline at 1,784 Won and Diesel at 1,773 Won

[Financial News]  
The government will lower the seventh oil price cap by 150 won per liter. The move comes as uncertainty in the Middle East has eased somewhat after the United States and Iran reached an agreement on a Memorandum of Understanding (MOU), while international oil prices have fallen. The government said it aims to reflect that decline in domestic fuel prices ahead of time and ease inflation pressure.
On the 26th, the Ministry of Trade, Industry and Energy said the seventh oil price cap, effective from midnight on the 27th, will be cut by 150 won per liter from the sixth cap. The same reduction will apply to gasoline, diesel and kerosene. The ceiling on supply prices for oil refining companies has been set at 1,784 won per liter for gasoline, 1,773 won for diesel and 1,380 won for kerosene.
As a result, retail prices at gas stations, which are currently in the low 2,000-won range per liter, are expected to fall into the 1,800-won range once existing inventories are depleted. However, because expensive stock purchased earlier remains in circulation, there may be a time lag before consumers actually feel the price cuts.
The government cited recent declines in international crude oil and petroleum product prices as the reason for the cut. After the United States and Iran agreed on the MOU last week, more tankers have been seen passing through the Strait of Hormuz, easing supply chain concerns from the Middle East. As of the 25th, international oil prices had fallen to the low to mid-$70s per barrel. The government also said international petroleum product prices have dropped sharply compared with the beginning of this month.
The government plans to check whether gas stations are deliberately delaying price cuts on the pretext of existing inventory. The government, consumer advocacy groups and public institutions will jointly monitor sales prices and volumes at about 10,000 gas stations nationwide, while the Interministerial Market Inspection Team will step up on-site inspections. Gas stations found to have engaged in illegal practices will face strict action.
The latest price cap will remain in effect for the next four weeks. However, MOTIE said it will closely monitor developments in the Middle East, international oil prices and domestic supply and demand, and will flexibly adjust the usual four-week review cycle if necessary. Meanwhile, as the cap is being cut sharply, discussions on an exit strategy for the system are likely to gain momentum if supply chains normalize and oil prices remain stable.
aber@fnnews.com Park Ji-young Reporter