South Korea Extends Fuel-Price Caps During Chuseok Holiday

With millions of South Koreans traveling for the three-day Chuseok holiday that begins on September 24 (scheduled), the Ministry of Trade, Industry and Resources announced on September 18 (deadline) that the government will keep the emergency fuel-price caps in place for another four weeks. The caps limit wholesale gasoline to 1,784 won per litre and diesel to 1,773 won per litre, shielding motorists from global oil prices that have risen above US$100 a barrel and Brent near US$110 a barrel in September.

The Straits Times

South Korea introduced the caps in March after the U.S. attack on Iran, marking the first use of this emergency tool in three decades. The government set aside 4.2 trillion won (?S$3.96 billion) for the initial six-month period and an additional 1.5 trillion won to fund the extension, while promising to compensate refiners for the price differential. Unlike the United States, Europe, or Singapore, which have largely passed higher wholesale costs onto consumers, South Korea and neighboring Japan have pursued direct subsidies to keep pump prices low.

The Straits Times

The Ministry cited rising consumer inflation and Middle-East volatility as reasons for maintaining the caps. The government also pledged to continue compensating refiners, although payments have not yet been made and disputes over loss calculations persist.

The Straits Times

Economists warn that the policy may strain public finances and blunt consumer awareness of rising oil costs. Sonn Yang-hoon, professor emeritus of economics at Incheon National University, argued that forced markdowns create a false sense of security and disproportionately benefit heavy users while taxpayers bear the burden.

The Straits Times

• “If the government keeps forcing markdowns, people won’t be aware that prices are rising for oil,” — Sonn Yang-hoon, professor emeritus of economics at Incheon National University

The Straits Times

• “In the past, a spike in fuel prices would significantly reduce traffic” — Park Yeong

The Straits Times