KDI: "Without Price Ceiling, March Inflation Would Have Hit 3.0%... Capped Prices Lowered Inflation by Up to 0.8%p"

An analysis by a state-run research institute has revealed that consumer prices last month could have reached as high as 3.0% if the government had not abruptly implemented the oil price ceiling in response to the Middle East war. The price ceiling is estimated to have lowered consumer prices by up to 0.8 percentage points.

The Korea Development Institute (KDI) announced on April 22 the results of its task force analysis responding to the Middle East war. KDI estimated that the first phase of the oil price ceiling, implemented at the end of last month, lowered consumer prices by 0.4 to 0.8 percentage points.

Based on the last week of last month, when the price ceiling was in effect, the price reduction effects were estimated at 460 won per liter for regular gasoline, 916 won for automotive diesel, and 552 won for indoor kerosene.

If it is assumed that gas station retail prices were affected only by international oil prices, the impact was a reduction of 0.8 percentage points; if a time lag is assumed, it was 0.4 percentage points.

Koo Yoon-cheol, Deputy Prime Minister for Economy and Minister of Economy and Finance, attended the Economic Ministers' Meeting and Growth Strategy Task Force at the Government Seoul Office in Jongno-gu, Seoul on the 31st. He spoke about the annual consumer price trends and support for vulnerable groups during the winter season. 2025.12.31 Photo by Jo Yong-jun

According to the March consumer price trends released by the Ministry of Data and Statistics, the price index last month rose by 2.2% compared to a year earlier. This suggests that, without the oil price ceiling, the consumer price inflation rate could have reached between 2.6% and 3.0%.

KDI also analyzed that the reduction in fuel taxes, which will be fully reflected starting this month, will have an impact of -0.2 percentage points on consumer prices.

KDI found that, so far, the Middle East war has not had a significant impact on consumption. Comparing the period from January to March this year with the same period from 2023 to 2025, the total amount of credit card spending showed a stable trend and did not decrease after the war compared to previous years.

Looking at specific sectors, spending on food and beverage services had already slightly declined before the outbreak of the war, and continued to show a mild downward trend afterward.

However, KDI did observe a slight decrease in the total number of people traveling domestically. KDI noted, "The declining trend is not statistically significant so far, but continued monitoring is needed to see if this trend persists going forward."

KDI analyzed the burden of household energy expenditure due to high oil prices and concluded, "It is necessary to address blind spots in support measures and to establish an energy support system tailored to household characteristics."

According to an analysis of the Household Income and Expenditure Survey (2022–2025), the proportion of energy expenditure relative to current income for the lowest 20% income group was more than three times higher than that of the top 20% income group. This highlights a clear regressive structure, where lower-income households face a higher energy expenditure burden.

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KDI found that, when analyzed based on whether households were receiving basic livelihood security benefits, non-recipient households actually faced a higher energy burden, indicating that differentiated support based solely on benefit status has its limitations.

KDI also reported that, compared to wage-earning households, households engaged in agriculture and those performing simple labor in the transportation sector (including delivery and freight drivers) had a significantly higher proportion of high energy expenditure households.

Agricultural households were mainly distributed in the 1st and 2nd income quintiles, while transportation simple labor households were predominantly in the 2nd to 4th quintiles. During the summer months (July–September), the proportion of housing and heating expenses increased significantly in the 1st quintile, and transportation fuel expenses rose markedly in the 2nd and 3rd quintiles compared to the 5th quintile. Low-income households were more affected by shocks in cooling and cooking energy expenses, while the 2nd and 3rd quintiles, which have a higher proportion of workers, were more impacted by changes in vehicle fuel costs.

KDI suggested, "In light of the increased burden of housing and heating costs for low-income households during the summer, measures should be considered such as providing essential goods to prepare for heatwaves through the Geunyang Dream Center and implementing emergency energy support linked to heatwave alerts."

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