Finance chief signals rotating ban for private cars if oil hits $120

Finance Minister Koo Yun-cheol, center, speaks during a joint briefing by relevant ministries on emergency economic response measures to the Middle East conflict at Government Complex Seoul, Thursday. Yonhap

The Korean government may extend its mandatory five-day rotating ban on vehicle operation to include privately owned cars if global oil prices rise past $120 per barrel, Finance Minister Koo Yun-cheol said Sunday.

Appearing on a KBS current affairs program, Koo said the government may need to raise the national resource crisis alert to Level 3 if conditions worsen, adding that extending the restrictions to the private sector could become necessary to secure broader cooperation.

"If the crisis escalates to Level 3, oil prices are likely to rise further, making demand restraint unavoidable," he said, adding that while participation by private vehicles is currently voluntary, the measure could become mandatory if the situation deteriorates.

Under the five-day rotating ban, vehicles are prohibited from operating one day each week based on the last digit of their license plates — those ending in 1 and 6 on Monday, 2 and 7 on Tuesday, 3 and 8 on Wednesday, 4 and 9 on Thursday and 5 and 0 on Friday, with no restrictions on weekends.

As part of efforts to address an energy supply crunch triggered by the U.S.-Iran conflict, the government has required public-sector passenger vehicles to comply with the rule since last Wednesday. Electric and hydrogen vehicles, cars used by people with disabilities and those carrying pregnant women or infants are exempt.

Major financial institutions such as KB Financial Group and conglomerates including Hyundai Motor Group have also joined on a voluntary basis.

Korea has a four-tier resource security crisis framework. The government activated Level 2, or “Caution,” at 3 p.m. on March 18 amid concerns over potential disruptions to crude oil supply.

Koo said any decision to raise the alert level would be based on a comprehensive assessment of overall conditions.

“While oil prices are currently fluctuating between $100 and $110 per barrel, authorities will weigh the situation if they move into the $120-$130 range,” he said.

There is historical precedent for restricting private vehicle use to curb energy consumption.

During the oil shocks of the 1970s, authorities banned the operation of luxury cars with eight or more cylinders. Following the 1990 Gulf War, which drove up oil prices, a 10-day vehicle rotation system was enforced for about two months in 1991. During the Asian financial crisis of the late 1990s, an odd-even driving scheme based on license plate numbers was considered but ultimately not implemented.

Separately, the Seoul Metropolitan Government has its own public-sector two-day rotation system as part of emergency measures to reduce fine dust levels, applying to government and public institution vehicles as well as employees’ cars. The latest such measure was enforced on March 17 this year.

Regarding the central government's plans, the Ministry of Economy and Finance has emphasized that no specific criteria or triggers involving private vehicles have been finalized.

"The possible application of a vehicle rotation scheme to private cars would be considered only if the crisis level is raised, based on a comprehensive review of factors including oil prices, overall energy supply conditions and the impact on people’s daily lives," a ministry official said. “Minister Koo cited oil prices as one of several indicators of the situation’s severity, and his remarks were meant to urge the public to join efforts to curb energy consumption."

Meanwhile, regarding an extra budget of about 25 trillion won ($16.5 billion) being prepared to mitigate the economic fallout from the Middle East conflict, Koo said spending will focus on four key areas — responding to high oil prices, supporting livelihoods, assisting key industries and stabilizing supply chains.

“The package will be financed entirely through higher-than-expected tax revenues and will not rely on issuing new debt,” he said.

Addressing the recent surge in the won-dollar exchange rate to more than 1,500 won per dollar, Koo downplayed concerns, citing the country’s strong external position, including more than $420 billion in foreign reserves and net external assets of about $900 billion. He said the situation is "not a cause for alarm."

He also noted that Korean government bonds will be included in the World Government Bond Index (WGBI) starting next month, while the government is pursuing entry into the Morgan Stanley Capital International developed market index.

He expressed expectations that WGBI inclusion could attract around $50 billion to $60 billion in foreign capital, helping support the domestic economy.