Korea cuts fuel price cap by 150 won per liter as oil prices retreat

Prices of gasoline and diesel are displayed at a gas station in Seoul, May 8. Yonhap

Korea will lower its fuel price cap by 150 won ($0.09) per liter starting Saturday, reflecting the recent decline in global crude oil prices and easing tensions in the Middle East, the government said Friday.

The Ministry of Trade, Industry and Resources announced that the seventh round of the country's fuel price cap system will take effect at midnight Saturday, lowering the ceiling for gasoline, diesel and kerosene by 150 won per liter from the previous level.

The move came after Finance Minister Koo Yun-cheol said earlier Friday that the government would adjust the cap system while maintaining emergency measures aimed at stabilizing consumer prices.

"The government will adjust the emergency measures currently in place in phases by closely monitoring developments in the Middle East and the Korean economy," Koo said during a meeting of economy-related ministers.

Under the new cap, refiners will be allowed to supply gasoline at up to 1,784 won per liter, diesel at 1,773 won and kerosene at 1,380 won. The government expects retail fuel prices at gas stations to fall from the low-2,000 won range to the 1,800 won range per liter.

The adjustment comes as international oil prices have dropped sharply since peaking earlier this month amid concerns over supply disruptions linked to the Middle East conflict.

According to the ministry, benchmark Brent crude prices fell from $95 per barrel in early June to $75 as of Thursday. U.S. West Texas Intermediate crude dropped from $93 to $72 over the same period, while Dubai crude declined from $94 to $64.

Refined product prices also retreated significantly. International gasoline prices fell from $116 per barrel in early June to $97 on Thursday, while diesel prices dropped from $148 to $112 and kerosene from $144 to $111.

The government said uncertainty surrounding the Middle East has eased somewhat following the memorandum of understanding reached between the United States and Iran last week, which has led to increased tanker traffic through the Strait of Hormuz.

"The government decided to make a bold reduction in the seventh fuel price cap by preemptively reflecting the decline in international oil prices in order to stabilize domestic fuel prices and ease the burden on consumers," the ministry said.

The fuel price cap system was introduced in March as an emergency measure to shield consumers from surging energy costs caused by disruptions to global supply chains during the Middle East conflict.