The Era of 2,000-Won Gasoline... Government at a Crossroads Over Raising the Price Ceiling

Gasoline Prices Reach 2,000 Won for the First Time in Four Years

Stubbornly High Oil Prices... Continued Upward Pressure

Government Faces Policy Dilemma Ahead of Fourth Price Ceiling Adjustment Next Week

As early as April 17, the average price of gasoline at gas stations nationwide is expected to surpass 2,000 won per liter. This is the first time in four years since 2022 that prices have reached the 2,000-won range. With opposition and skepticism growing over the price ceiling policy, authorities are facing mounting concerns as the fourth price ceiling adjustment approaches on April 24.

According to Opinet, operated by Korea National Oil Corporation, as of 9 a.m. on April 17, the average retail price of gasoline at gas stations nationwide stood at 1,999.60 won per liter. Considering the current upward trend, it is highly likely that prices will exceed 2,000 won on the same day. The nationwide average surpassing the 2,000-won mark would be the first time in approximately four years since the outbreak of the Russia-Ukraine war in 2022.

International oil prices also remain stubbornly high. As of the previous day, Brent crude was priced at 94.87 dollars per barrel, and West Texas Intermediate (WTI) was at 91.32 dollars. Dubai crude has also been maintaining high levels, hovering around 100 dollars per barrel. In particular, over the past month, both Brent crude and WTI have risen by more than 30%, already reaching high price levels. Since changes in international oil prices are typically reflected in domestic gas station prices with a lag of two to three weeks, there remains continued upward pressure on prices.

The market's attention is focused on whether the fourth adjustment of the petroleum product price ceiling will take place. The current price ceiling policy reflects part of the increase in international oil prices and serves to curb the pace of price surges. However, concerns about declining profitability among gas station operators and the need for consumer price stability are clashing, fueling the debate over the effectiveness of the policy.

Jang Taehoon, a researcher at the Korea Energy Economics Institute, explained, "In addition to the implementation of the price ceiling policy, the government has also tightened supervision over gas station retail prices, which inevitably forces gas stations to operate with lower margins than usual. As a result, profitability has deteriorated, leading to growing discontent within the industry."

If the increase in international oil prices had been fully reflected without a price ceiling, gasoline prices at gas stations would have already surpassed an average of 2,000 won, and in some places could have exceeded 3,000 won. Looking at the average diesel prices in 20 OECD European countries, the price per liter was 2,685.99 won in the first week of March, but rose to 3,538.7 won in the third week—a 31.75% increase. In comparison, during the same period, Korea's prices rose from 1,680.4 won to 1,815.8 won, an 8.05% increase, which is four times lower than the increase in Europe.

President Lee Jaemyung also remarked during a Cabinet meeting on April 14, "Thanks to the petroleum price ceiling, I wonder if we haven't become the country with the lowest fuel prices in the world. In this situation, some people should be reducing consumption, but instead, consumption is increasing. There is also opposition as to whether lowering prices is 100% the right thing to do."

The government has explained that the price control policy is effectively curbing demand, citing a decline in gas station sales volumes. In fact, over the past month, from the third week of March to the second week of April, total gas station sales volumes amounted to 2,551,731 kiloliters, a 5.2% decrease compared to the same period last year (2,690,734 kiloliters).

Separate from the government's position, there is a prevailing view that the fourth price ceiling adjustment is inevitable, as market prices are nearing the cap due to rising international oil prices. If the cap is not adjusted to reflect this, the burden on refiners and gas station operators could increase significantly.

However, if the cap is raised, it will inevitably lead to higher consumer prices, which limits the range of policy options available. On April 15, presidential chief of staff Kang Hoonshik was asked whether the government was internally reviewing whether to continue the petroleum price ceiling policy and responded, "The policy will continue. We will keep implementing it, but the issue is the price," adding, "We are discussing whether an adjustment to the price is necessary."

Hong Sungwook, Director of Industrial Economic Data Analytics at the Korea Institute for Industrial Economics & Trade, stated in a recent report titled "Policy Implications and Future Directions of the Petroleum Price Ceiling Policy," "While the petroleum price ceiling can help curb sharp price increases and ease the burden on consumers in the short term, in the medium to long term, it could distort the market and reduce supply, so it should be used in a limited manner." He added, "To ensure stable policy effectiveness in the future, it is necessary to combine various policy tools, such as reducing fuel taxes, providing direct support to vulnerable groups, utilizing oil reserves, and diversifying supply sources."

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