Korea's fuel price cap shields consumers but raises sustainability concerns
South Korea's government is under pressure to maintain its fuel price cap policy amid rising global oil prices due to the Iran war, as it shields consumers but raises concerns about sustainability and energy consumption. The policy has limited price increases but may lead to additional fiscal strain and insufficient reduction in energy consumption.
South Korea's fuel price cap policy is under scrutiny as global oil prices rise due to the Iran war. The average gasoline price nationwide was 2,005.39 won per liter on Thursday, up 18.5% from February 27. The government's price cap has limited the increase compared to global markets, where Singapore's gasoline prices surged 49%. The government plans to continue the price cap to curb inflation, but this may lead to additional fiscal strain as it compensates refiners for losses. The policy has also not sufficiently reduced energy consumption, with weekly gasoline and diesel sales 9% higher in the fourth week of March compared to a year earlier. Critics argue that maintaining a price ceiling limits the effect of reducing energy use and may worsen the trade balance and lead to inflationary pressure.
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