[Issue] Mixed Reactions in Gwangju and Jeonnam to Oil Price Cap Proposal

Hopes for Fuel Price Stabilization
Concerns Over Supply Shortages
Experts Urge Caution and Careful Measures

On the morning of the 12th, fuel prices including gasoline were displayed at a gas station in Buk-gu, Gwangju. Photo by Min Hyunki

Due to the aftermath of the Iran crisis, international oil prices have surged, causing the average gasoline price in the Gwangju and Jeonnam regions to surpass 1,900 won per liter. As the burden on households and industries increases, the government announced this week its plan to implement an "oil price cap," signaling strong measures to curb inflation. However, at the local level, there is a sharp divide between hopes for price stabilization and concerns over potential side effects from supply contraction.

"Stabilizing Fuel Prices Is Key to Survival"...A Ray of Hope for Farmers and Transportation Industry

In local basic industries where fuel costs account for a high proportion of expenses, the government's move to introduce a price cap has been met with initial approval. In particular, farmers in Jeonnam—a region with the largest concentration of greenhouse facilities in the country—agreed that stabilizing the price of tax-free fuel is directly linked to their livelihoods.

Mr. Lee (45), who operates a strawberry greenhouse in Bongsan-myeon, Damyang County, said, "Greenhouse farmers pour diesel into heating during the winter, and with the recent surge in oil prices, heating costs now account for 30 to 40 percent of total production costs. In this situation, where the cost of heating is outweighing everything else, if a price cap is introduced to maintain at least a minimum threshold, it would provide great relief for farm management."

Delivery and taxi workers in Gwangju also responded with cautious optimism. Mr. Park (63), a private taxi driver, said, "Even if I drive for more than 12 hours a day, after deducting fuel costs, what remains is less than minimum wage. If the government enforces a price cap, the uncertainty in my income will decrease, and I will be able to go out on the road with more peace of mind."

Mr. Choi (36), a delivery driver, also emphasized, "When fuel prices go up, the more deliveries I make, the more losses I incur. If a price cap is implemented, it will greatly help protect the real income of ordinary citizens."

On the afternoon of the 12th, citizens are boarding taxis at the taxi stand of the Comprehensive Bus Terminal in Gwangcheon-dong, Seo-gu, Gwangju. Photo by Min Hyunki

"Even with Money, Fuel May Be Unavailable"...Concerns Over Supply Contraction

On the other hand, there are strong warnings that forcibly suppressing prices could lead to market distortions. If oil refiners reduce domestic supply due to decreased profitability and increase exports, there is concern that a "fuel crisis" could occur at the local level.

An official from the Yeosu National Industrial Complex, home to the country's largest petrochemical complex, said, "From the perspective of oil refiners, a price cap that doesn't guarantee margins could directly cause a reduction in domestic supply. If a supply crunch occurs and we can't secure the necessary volume when needed, it would deal a fatal blow to the operation of industrial complexes."

There are also concerns that if the price ceiling is set lower than the market price, sellers may hoard fuel in anticipation of future price increases and refrain from selling—a phenomenon known as "hoarding." Mr. Kim (52), who runs a gas station in Suncheon, said, "If the government controls prices, supplies could get stuck at the wholesale level, and as a retailer, I can't sell at a loss. In the end, I'm worried that the damage will be passed on to consumers."

Experts: "Supply Stabilization Measures Needed...Sophisticated Design Is Key"

Academics and energy experts agree that the success of the oil price cap depends on the appropriateness of the ceiling and supply chain management. They emphasize that rather than simply suppressing prices, precise supplementary measures that take market trends into account are necessary.

Hwang Jaehee, a professor of economics at Chonnam National University, said, "Since refiners cannot physically move products externally in the short term, this may not immediately occur, but if international oil prices rise and only domestic sales prices are forcibly suppressed, refiners may find it more advantageous to export and avoid domestic supply. When setting the price ceiling, it is crucial to guarantee minimum margins for refiners and distributors, and to implement administrative incentives or clauses to secure domestic supply."

Meanwhile, local governments in Gwangju have announced plans to conduct large-scale inspections of unfair trade practices at gas stations in line with government policy. An official from Buk-gu said, "We will thoroughly manage to prevent illegal acts such as price collusion during periods of high oil prices. We will make every effort to establish order in distribution to protect the livelihoods of ordinary people."

This content was produced with the assistance of AI translation services.