Oil Prices in Jeopardy Due to Middle East Instability... President Lee Orders "Price Ceilings"

President Lee Jae-myung on March 5 ordered the implementation of price ceilings to prevent a sharp rise in oil prices caused by instability in the Middle East. He also called for the prompt execution of a 100 trillion won market stabilization program, designed to swiftly contain any turmoil in the capital markets. He stressed the need for a strict response to the spread of fake news, market manipulation, and hoarding activities that seek to exploit the current chaos.

President Lee Jae-myung is speaking at the cabinet meeting held at the Blue House on the 5th to discuss measures in response to the situation in the Middle East. Photo by Yonhap News

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Upon returning from a three-night, four-day state visit to Singapore and the Philippines, President Lee convened an extraordinary cabinet meeting at the Blue House on the morning of March 5. He instructed, "Quickly set realistic price ceilings for oil by region and by product type." President Lee encouraged swift action, stating, "Setting a price ceiling seems to be the most practical and immediate measure at this time. Do not hesitate too much."

The price ceiling system, based on Article 2 of the Price Stabilization Act, can be implemented in cases of internal or external crises, natural disasters, or fiscal and economic emergencies. It is a measure that restricts the prices of goods critical to the stability of people's livelihoods or the national economy. Any violations result in the recovery of the full amount of unjust gains through fines. Historically, this system has only been used in exceptional cases, such as for coal or briquettes.

Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-cheol reported, "We will review prices this afternoon and, if prices are high, consider designating the highest price through an official announcement. The Fair Trade Commission will conduct a collusion investigation; if collusion is confirmed at gas stations with high prices, price readjustment measures may be taken."

President Lee pointed out, "There is a need for a strong crackdown and firm response to those who attempt hoarding or make unreasonable profits by exploiting difficult market conditions. It appears that some are trying to profit from others’ suffering by taking advantage of this national crisis." He further emphasized, "There are no objective signs of serious disruptions to oil supply, yet suddenly gasoline prices at gas stations have surged. I would like to see measures for sanctions discussed."

In response, Deputy Prime Minister Koo warned, "If hoarding occurs, corrective action or even criminal penalties may be imposed in accordance with the Price Stabilization Act."

President Lee Jae-myung is speaking at the Cabinet meeting held at the Blue House on the 5th to discuss measures to respond to the situation in the Middle East. Photo by Yonhap News

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President Lee also urged, "Along with emergency measures to stabilize the supply of crude oil, gas, and naphtha, I ask that you promptly pursue plans to diversify import sources in the medium and long term." The closure of the Strait of Hormuz by Iran’s Islamic Revolutionary Guard Corps (IRGC) has heightened concerns about disruptions in Middle Eastern energy supplies. The government stated that domestic oil reserves are at a substantial level and announced plans to secure oil from regions outside the Middle East.

He also called for active measures to address increased volatility in financial markets, such as stocks and exchange rates. President Lee said, "The government should accelerate policy efforts to enhance the resilience and stability of the capital markets. Please ensure the appropriate execution of the 100 trillion won market stabilization program, which was prepared in advance to block capital market instability." Financial authorities plan to inject over 100 trillion won if market volatility becomes excessive. The program consists of a 40 trillion won bond market stabilization fund and real estate project financing (PF) soft landing funds.

However, President Lee analyzed, "A solid stock market requires some adjustments along the way, but the fact that it doubled in such a short time added instability. This may actually serve as an opportunity to strengthen the market, as necessary adjustments could become a positive factor."

Additionally, President Lee stressed, "Efforts should be made to minimize the impact on the real economy. For companies highly dependent on Middle East exports and the shipping industry, which will be directly affected by this situation, I instruct you to swiftly and broadly provide policy-based financial support."

To the government, President Lee added, "Please prepare thorough contingency evacuation plans, with multiple layers of detail, in case of emergencies. Continuously check the safety of Korean nationals on site and, if necessary, establish and implement swift and safe evacuation plans in cooperation with allied countries."

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