Seoul: The fuel price cap system contributed to a reduction in consumer prices by up to 0.8 percentage points in March, as reported by a state-run economic think tank on Wednesday. The report also noted that the effects of fuel tax cuts are expected to begin manifesting this month.
According to Yonhap News Agency, South Korea implemented price ceilings on gasoline, diesel, and kerosene supplied to gas stations by oil refineries starting March 13. This measure was introduced to control domestic fuel prices, which surged following the outbreak of conflict between the United States and Iran.
The Korea Development Institute (KDI) stated that the price cap system led to last month's decline in consumer prices. The institute assessed the impact by comparing actual fuel prices with hypothetical prices, assuming no price ceilings were in place. In the fourth week of March, the average price for gasoline was recorded at 1,819 won (US$1.23) per liter, diesel at 1,816 won per liter, and kerosene at 1,509 won per liter.
Without the price caps, the prices for gasoline, diesel, and kerosene would have been higher by 460 won, 916 won, and 552 won per liter, respectively, as per KDI's analysis. The think tank also indicated that the effects of expanded fuel tax cuts will become evident this month, predicting a further reduction in consumer prices by approximately 0.2 percentage points.
As part of the government's strategy to alleviate consumer cost burdens, tax cuts on fuel products, initially set at 7 percent for gasoline and 10 percent for diesel, have been increased to 15 percent and 25 percent, respectively, through the end of May.