Korea sets oil price cap starting March 13 amid Iran crisis

Industry Minister Kim Jung-kwan speaks during a ministerial-level task force meeting aimed at stabilizing consumer prices at Government Complex Seoul, Thursday. Yonhap

The government is imposing a temporary price cap on wholesale prices for refined petroleum products starting midnight Friday, setting ceilings at 1,724 won ($1.17) per liter for regular gasoline, 1,713 won for diesel and 1,320 won for kerosene.

The price ceilings are 109 won lower for gasoline, 218 won for diesel and 408 won for kerosene, compared with the average supply prices that refiners submitted on March 11, which were 1,833 won, 1,931 won and 1,728 won, respectively.

The cap is based on the refiners’ average supply prices, multiplied by the recent change in international benchmark prices, using the Mean of Platts Singapore (MOPS), plus applicable taxes. It will not apply to retail prices as gas station costs and margins vary widely by region and business model, the Ministry of Trade, Industry and Resources said.

In island regions that rely on sea transport, the cap is slightly higher at 1,743 won per liter for gasoline, 1,732 won for diesel and 1,339 won for kerosene.

The price cap will be reset every two weeks, with each new ceiling calculated based on the previous cap and adjusted for recent moves in international prices.

It will remain in place indefinitely until conditions in the Strait of Hormuz normalize and authorities determine that prices have effectively returned to pre-war levels.

“The government will introduce a cap on refined petroleum product prices to stabilize fuel costs, address market distortions such as unjustified price hikes and ensure that the state, companies and consumers share the burden of higher energy prices,” Industry Minister Kim Jung-kwan said Thursday during a ministerial-level task force meeting aimed at stabilizing consumer prices at Government Complex Seoul.

“We plan to allow refiners to raise the prices they charge gas stations and distributors only within the range implied by movements in international oil product benchmarks and not deviate from global price trends.”

Gasoline and diesel prices are displayed at a gas station in Seoul, Monday. Yonhap

The move — the first of its kind since Korea fully liberalized petroleum prices in 1997 — aims to curb sharp price swings in the domestic market following heightened geopolitical tensions in the Middle East. The U.S.‑Israel conflict with Iran has caused disruptions to global oil flows, including through the Strait of Hormuz, pushing up prices and stoking supply disruption fears.

Since the Iran crisis erupted, Brent crude has jumped from the low $70 range to briefly over $100 a barrel before settling back in the low $90s.

Gasoline prices in Korea have risen more than 200 won per liter and diesel climbed over 300 won after the crisis broke out, before turning lower as of Wednesday.

As the price cap only applies to refiners’ wholesale prices, the government plans to closely monitor retail pricing to prevent excessive markups by gas stations. Monitoring will rely on existing systems that track transactions and fuel prices nationwide, allowing the industry ministry to identify unusual price hikes or hoarding.

An industry ministry official said the impact should filter through fairly quickly, and that consumers are likely to feel the effect about two to three days after the cap is imposed.