Seoul: South Korea on Friday decided to lower price ceilings on fuel products, citing easing geopolitical tensions in the Middle East, while deciding to keep the price cap system in place for the time being. Maximum prices for regular gasoline, diesel, and kerosene supplied to gas stations by local oil refiners will each be lowered by 150 won to 1,784 won (US$1.16), 1,773 won, and 1,380 won per liter, respectively, according to the Ministry of Trade, Industry and Resources. The new prices will take effect Saturday.
According to Yonhap News Agency, the decision follows a memorandum of understanding between the United States and Iran to end hostilities. This development has led to an increase in the number of oil tankers passing through the Strait of Hormuz and has eased uncertainties surrounding the geopolitical situation in the Middle East to some extent. South Korea adopted the price ceiling system in March in a bid to stabilize domestic fuel prices amid volatility in the global energy market caused by the effective closure of the crucial waterway.
The industry ministry stated that the decision to lower the caps was made to preemptively reflect the decline in global crude oil prices. The latest prices will remain in effect for four weeks, but the ministry plans to adjust the pricing cycle flexibly depending on changes in market conditions.
This measure comes as the government aims to tackle inflation following a 3.1 percent rise in consumer prices last month compared to a year earlier, marking the sharpest increase in 26 months. Petroleum product prices surged by 24.2 percent on-year in May, contributing 0.92 percentage points to the overall consumer price increase, the sharpest rise since the 35.2 percent spike recorded in 2022 during the early stage of Russia's invasion of Ukraine.