Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Fuel prices surge after Iran crisis, raising collusion concerns in Korea
A gas station in Seoul / Korea Times photo by Lee Min-hyung
By Lee Min-hyung
Gov't considers setting upper limit on oil price
Fuel prices in Korea are rising at an unusually steep pace following the recent Iran crisis, raising concerns over possible collusion by gas stations and prompting renewed calls for stronger government intervention.
According to Opinet, the fuel price information system operated by the state-run Korea National Oil Corp., average gasoline prices across the nation reached 1,871.83 won ($1.27) per liter as of 5 p.m. Friday, up 37.55 won from the previous day.
Diesel prices climbed even more sharply, rising by 57.13 won over the same period to reach 1,877.38 won per liter.
The latest surge pushed domestic gasoline prices above 1,800 won per liter for the first time in more than three years.
The spike comes in the aftermath of U.S. and Israeli airstrikes on Iran and retaliatory moves by Tehran, which have fueled volatility in global oil prices.
Industry officials and gas station operators said structural factors within the domestic fuel distribution system make it difficult to curb rapid price hikes.
Gasoline and diesel prices are displayed at a gas station in Seoul, Friday. Korea Times photo by Lee Min-hyung
Under the current system, oil refiners supply fuel to gas stations at a provisional price and later notify them of the final cost.
As the final purchase price is determined after delivery, gas station operators said they have little choice but to preemptively raise retail prices to cover the possible end-price hike from refiners.
“With international oil prices rising sharply due to the ongoing Iran crisis, each gas station expects higher settlement prices later,” a gas station official in Seoul said. “Most other gas stations face a similar situation, so they are structurally compelled to raise retail prices in advance.”
The government has issued multiple warnings about rising fuel prices, and President Lee Jae Myung said Thursday that authorities would crack down on unfair market practices.
“There is a need to strongly regulate attempts to exploit difficult market conditions through hoarding or unreasonable profiteering,” Lee said, signaling the government’s willingness to intervene if necessary.
President Lee Jae Myung attends a meeting with senior secretaries at the presidential office in Seoul, Friday. Yonhap
Despite the warning, prices continued to rise Friday, suggesting that the government’s message had limited immediate impact on the market. This has raised calls for strengthened regulatory measures.
Lee went on to issue another warning against price-fixing by gas stations or refiners.
“Collusion is a serious crime, and those who engage in the practice will find out that they will have to pay a heavy price in the end,” Lee said.
Another factor pushing prices higher is panic buying by drivers concerned about further fuel price increases. The recent surge in demand is widely considered to have added pressure on gas stations to adjust prices more quickly.
The government has signaled that it is closely monitoring the situation.
Deputy Prime Minister and Finance Minister Koo Yun-cheol said Friday that authorities are closely monitoring a range of potential irregularities, including excessive profiteering by gas stations and refiners.
“We maintain a zero tolerance principle against any practices that make ill use of the national crisis,” Koo said. “We are considering setting an upper limit of oil prices by region and fuel type.”
The Fair Trade Commission is also launching an investigation into excessive profiteering by market players, according to Koo.
Justice Minister Jung Sung-ho also ordered prosecutors Friday to sternly respond to any attempts to fix oil prices, calling them a "serious, antisocial criminal activity."