Seoul, March 8 The government is considering adopting a price cap system for oil for the first time in nearly 30 years, sources said on Sunday, amid concerns over rising energy prices following the escalating conflict in the Middle East.
Officials began reviewing the possibility after surging global crude prices were reflected almost immediately in domestic fuel prices, rather than after the typical two-week lag, following U.S.-Israeli strikes on Iran and Tehran's retaliatory attacks in the region.
South Korea, which depends heavily on energy imports, is particularly vulnerable to external price shocks, which often drive inflation, reports Yonhap news agency.
The review is being conducted under Article 23 of the Petroleum and Alternative Fuel Business Act, which allows the industry minister to designate a maximum sales price when oil prices fluctuate sharply and threaten economic stability.
However, the provision has effectively remained dormant since the country liberalised oil prices in 1997.
Sources said the government is weighing the option carefully because of potential side effects, including market distortions and fiscal burdens.
While presiding over an extraordinary Cabinet meeting Thursday to discuss the U.S.-Israeli strikes on Iran, President Lee Jae Myung ordered officials to swiftly devise a price cap system by region and fuel type if implementing a nationwide uniform cap proves difficult. The following day, Lee also warned oil refiners against possible collusion in raising gasoline prices.
Following the president's directive, the government launched an interagency inspection team to crack down on illegal oil distribution and hoarding, as well as unfair trade practices.
In addition, the government decided to secure more than 6 million barrels of crude oil from the United Arab Emirates to stabilize energy supplies.
Despite such measures, however, gasoline prices at domestic gas stations continue to rise.
The average gasoline price exceeded 1,890.87 won (US$1.27) per liter as of Saturday night, according to data from the Korea National Oil Corp.
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