From midnight on Oct. 17 the government is holding the 11th maximum petroleum price at the previous level for four weeks. The move aims to ease the burden on prices while international crude trades above $100 amid Middle East instability.
According to Hankyung, Global Economic and Asia Economy, the Ministry of Trade, Industry and Energy announced on Oct. 16 that the 11th maximum price would stay the same as the 10th, effective from 0:00 on Oct. 17 for four weeks. The caps per liter are 1,784 won for gasoline, 1,773 won for diesel and 1,380 won for kerosene. Note that these are not pump prices but wholesale ceilings on what refiners charge gas stations.
광고 문의 · 300×250It is the fourth straight freeze since the 7th-round price, which was cut by 150 won per liter after the U.S.-Iran end-of-war agreement in late June. Hankyung reported that as of Oct. 15 Brent was $105.9 a barrel, Dubai $107 and WTI $98. The outlets said Middle East tensions, including attacks on ships in the Strait of Hormuz and on Saudi facilities, are continuing.
Global Economic reported that international diesel prices have passed $170 a barrel. For households, the cap acts as a partial buffer against the felt burden. Overall consumer inflation eased to 2.9% last month, but petroleum prices were still 14.8% higher than a year earlier and remain a heavy item.
Side effects are debated. Some argue a price ceiling encourages consumption: gasoline sales rose 3.0% year on year last month. The government attributes most of the increase (about 29,000 of 36,000 kL) to the Chuseok holiday and expressway station discounts. Cumulatively from the third week of March, when the cap began, through the second week of October, gasoline sales were down 1.7% and diesel 7.6%, according to the government.
Refiners are calling for looser export limits. Exports of petroleum products are currently capped at 100% of the volume in the same month a year earlier, which refiners say prevents them from benefiting from high international prices. The ministry says it will work with the industry on export management as long as domestic supply is not at risk. Refiners’ actual profits or losses and any subsidies were not confirmed in these reports.
Looking ahead, the Bank of Korea’s monetary policy meeting on Oct. 22 is a variable. Global Economic noted that U.S. September CPI rose 3.7%, raising the odds of further tightening, and that higher energy costs could add to inflation pressure in Korea. Whether to adjust the price will likely be discussed again around mid-November, when the four weeks end, but the exact schedule is unconfirmed.
