South Korea weighs cutting fuel price cap as global oil falls below pre-war levels

The government is reviewing a plan to lower the ceiling on domestic fuel prices after international oil prices fell back to pre-war levels following progress in US-Iran negotiations.

The national average gasoline price has stayed above 2,000 won per liter since April, driven by geopolitical tensions in the Middle East and rising global crude prices, but analysts expect it to dip below that threshold soon.

According to the Ministry of Trade, Industry and Energy, Brent crude futures stood at $73.14 per barrel as of 8 a.m. Wednesday — in effect recovering to the level seen just before the war broke out ($72.48).

West Texas Intermediate also fell below the $70 mark, trading at $69.92, while Dubai crude dropped to $67.29 — cheaper than its pre-war price.

"International crude and gas prices have fallen on expectations of expanded Middle Eastern oil supply through the Strait of Hormuz," a ministry official said.

Yet pump prices that consumers actually feel have barely budged. As of 8 a.m. Wednesday, the national average stood at 2,007 won per liter for gasoline and 1,998 won for diesel — holding near the 2,000-won mark for roughly three months since April. That remains far above the 1,500-to-1,600-won range seen before the war.

The main reason global price drops are not immediately reflected at the pump is a time lag. Gas stations typically receive product deliveries every two to three weeks, meaning expensive existing inventory must be sold off before prices can come down.

The government-set fuel price ceiling, which remains at a relatively high level, has also been identified as a factor holding back price declines.

The government introduced the fuel price ceiling system on March 13 to curb a sharp surge in oil prices. After prices spiked following the outbreak of the Middle East war, authorities set an upper limit on the wholesale prices that refiners charge gas stations.

The ceiling has remained unchanged for nearly three months since it was raised by 210 won per liter across fuel types in the second adjustment on March 27 — set at 1,934 won for gasoline, 1,923 won for diesel and 1,530 won for kerosene.

The price cap served as a defensive line against runaway domestic fuel prices when it was introduced. Now, as global crude falls, it has become a floor that is slowing the decline in prices.

The government is now considering lowering the ceiling to bring down pump prices for consumers, in line with the original goal of stabilizing household living costs.

President Lee Jae-myung, at a senior secretary meeting Thursday, said the presidential office and the government "must swiftly pursue bolder measures, including adjustments to the price ceiling, to stabilize fuel prices," signaling strong resolve to ease the burden on ordinary citizens.

Industry Minister Kim Jung-kwan also said at a press briefing June 22 that "given current oil price levels, which have come down in anticipation of the war, I believe there is some incentive to lower the ceiling itself and we are reviewing that."