Gov’t keeps fuel price caps unchanged amid inflation concerns

(Yonhap)

The South Korean government on Thursday kept fuel price caps unchanged for the fourth straight time, citing concerns over the burden on people’s livelihoods amid high inflation.

The Ministry of Trade, Industry and Resources announced on Thursday that the fifth round of maximum oil prices, which will take effect at midnight on Friday, will remain at current levels.

Accordingly, the maximum price for gasoline will stay at 1,934 won ($1.33) per liter, diesel at 1,923 won and kerosene at 1,530 won. It marks the fourth consecutive freeze.

The fuel price cap system sets a ceiling on refiners’ supply prices to gas stations and is adjusted every two weeks.

The government said it decided to maintain the caps despite a recent decline in Mean of Platt‘s Singapore benchmark refined fuel prices, citing accumulated deferred increases and inflationary pressure.

Since introducing the system in March, the government has reflected only part of the increase in global oil prices. Deferred increases have since accumulated to about 200 won for gasoline, 400 won for diesel and 600 won for kerosene.

While authorities acknowledged the need to eventually normalize prices, they said higher fuel costs could further strain households at a time of elevated inflation.

“The government prioritized stabilizing livelihoods under the fuel price cap system as consumer inflation accelerated to 2.6 percent in April and petroleum product prices jumped 22 percent,” said Vice Minister Moon Shin-hak. “We weighed the impact on groups particularly vulnerable to fuel costs, including truck drivers, delivery workers, farmers and fishermen.”

He added that the fuel price cap system is acting as “a buffer against global oil price shocks,” adding that the government takes accumulated deferred increase pressures into account rather than mechanically reflecting global oil price swings.

Responding to criticism that gasoline prices could be raised unlike diesel prices, which are more closely tied to low-income households, Moon said there had been “intense internal discussions” but noted gasoline prices carry significant weight in overall inflation.

The government also reaffirmed its policy of fully compensating refiners for losses incurred under the price cap system. It plans to establish a settlement committee this month comprising legal, accounting and petroleum experts to determine the final compensation amount.