South Korea Plans Fuel Price Cap as Oil Nears $120 Amid Mideast Conflict

TLDR

• South Korea may introduce its first fuel price cap in nearly 30 years.
• Global oil prices climbed close to $120 due to Middle East supply risks.
• About 70% of South Korea’s oil shipments pass through the Strait of Hormuz.
• Seoul holds about 100 million barrels in reserves covering over 200 days.

South Korean President Lee Jae Myung has urged officials to impose a fuel price cap. The move aims to limit rising domestic energy costs. Oil prices climbed near $120 per barrel as tensions escalated in the Middle East. Lee made the request during an emergency economic meeting on Monday. 

The government wants to prevent rapid increases in gasoline prices. South Korea relies heavily on imported energy and faces risks from global supply disruptions. Authorities said the measure could be introduced within days if conditions worsen. Officials are also preparing emergency steps to secure oil and gas supplies.

Government Pushes Emergency Price Controls

President Lee asked authorities to “swiftly introduce and boldly implement” a maximum fuel price system. The policy aims to curb what officials described as excessive increases in petroleum prices. South Korea has not used such a price control system for almost 30 years. Officials said the government could adjust the cap every two weeks. The change would reflect movements in global crude prices.

Industry Minister Kim Jung-kwan said preparations for the policy are nearly complete. He said the government will closely monitor market conditions before implementation. “We have almost finished preparations,” Kim told reporters after returning from a trip to the United States. 

He added that authorities would respond quickly if prices continue rising. The government also warned fuel companies against taking advantage of the global price surge. Officials said companies could face accountability if they raise prices unfairly.

Oil Supply Risks From Middle East Conflict

Global oil markets have tightened as conflict in the Middle East disrupts supply. Several suppliers in the region have reduced output. Shipping routes have also been affected. The Strait of Hormuz remains a key concern for energy markets. The narrow waterway handles a large share of global oil shipments. Around 70% of South Korea’s crude imports usually pass through it.

Officials said about 1.7 million barrels per day of shipments to South Korea are linked to the route. Disruptions could affect domestic supply and prices. The United States has warned about possible escalation in the conflict. Markets reacted quickly as traders feared further supply limits. Oil prices reached levels not seen since 2022.

Domestic gasoline prices have already started rising. The average retail gasoline price reached 1,895.32 won per liter on Sunday. The price was about 12% higher than the level recorded on February 28.

Strategic Reserves and Alternative Supply Plans

Seoul plans to release oil from its strategic reserves as an early response. The country holds about 100 million barrels in reserves. Officials said this amount can cover more than 210 days of consumption. South Korea may also access crude stored jointly with oil producing countries. Authorities estimate that about 20 million barrels could be secured through this arrangement.

The government is also working to diversify energy imports. Officials are seeking shipments from regions outside the Middle East. The United Arab Emirates recently offered crude cargoes that avoid the Strait of Hormuz route. South Korea has shown interest in these supplies. Energy officials are also addressing supply problems in the petrochemical sector. Yeochun NCC Co. declared force majeure due to disruptions in naphtha imports.

Industry Minister Kim said firms dependent on petrochemical feedstock face higher supply risks, and support measures will be announced soon. Authorities are also monitoring LNG imports, with 14% sourced from the Middle East, though alternatives are available. President Lee said the 100 trillion won market stabilization program could expand if financial volatility rises.

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