[The Paradox of the Price Ceiling]③Global Oil Prices Rise as Korea Moves in the Opposite Direction... Refinery Industry Losses Snowball
by Lee Hyeonjoo
by Jang Bokyeong
Published 16 Apr.2026 11:01(KST)
Updated 16 Apr.2026 16:44(KST)
Domestic Price Suppression Leads to Increased Consumption
Sales Rise Significantly After Mid-March
Trend Diverges from OECD; Weakened Incentives for Conservation
Amid the war between the United States and Iran, the Strait of Hormuz has been blockaded, prompting the government to implement a petroleum price ceiling system for the first time in about 30 years since oil price liberalization in 1997. As of April 16, 2026, approximately one month after the initial enforcement on March 13, local gas stations have been voicing difficulties due to operating losses. While the petroleum price ceiling system, which was introduced to stabilize market prices, has had a positive effect in the short term by easing inflation, there are growing concerns that a prolonged situation is undermining the existing distribution network. This article examines issues such as losses caused by entrenched structural costs and the paralysis of market functions due to artificial price fixing, and seeks possible measures to minimize the resulting damage.
One month after the government implemented the price ceiling system, the upward trend of domestic gasoline prices has slowed, but concerns about market distortion are growing. There is debate over the effectiveness of the policy, as a gap has emerged between the upward pressure on international oil prices caused by supply disruptions and the domestic market trend. Moreover, signs of increased demand resulting from price suppression have led to criticism that market functions are being undermined.
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According to the Korea Petroleum Quality & Distribution Authority on April 16, gasoline sales in the second week of March recorded 257,423 kiloliters. After the initial introduction of the price ceiling system, sales in the third week increased to 277,307 kiloliters, and after the second application of the price ceiling in the fourth week, sales further rose to 321,051 kiloliters. In the first week of April, gasoline sales slightly decreased to 250,261 kiloliters, likely due to consumers having refueled in mid-March or anticipating that the third price ceiling would remain unchanged, and thus not rushing to refuel.
Despite suppressed prices, consumption has not significantly decreased, leading to analysis that the demand adjustment function is not working properly. With the government controlling prices, the market mechanism that should follow the principles of supply and demand is facing a state of paralysis.
Yoo Seunghoon, Professor at the Department of Future Energy Convergence at Seoul National University of Science and Technology, stated, "Unlike other countries, the fundamental problem in Korea is that gasoline consumption does not drop dramatically even in a crisis," adding, "By capping prices, the government may be sending consumers the wrong message that they don't need to conserve." Professor Yoo further explained, "Because demand is not sufficiently decreasing, the government and refiners are scouring the globe to secure crude oil. In fact, Korea is even importing oil from landlocked countries such as Kazakhstan."
The gap with international oil price trends is also cited as a factor exacerbating structural distortions. According to Korea National Oil Corporation, among OECD countries, Germany's average price rose from 3,529.2 won in the second week of March to 3,681.7 won in the fourth week, in line with the upward trend in crude oil prices. In contrast, Korea's price fell from 1,901.6 won to 1,819.2 won during the same period.
Although gasoline prices are composed of refinery supply costs, distribution margins, and taxes, the price ceiling system has limited the reflection of cost increases. According to GlobalPetrolPrices, over the month after February 23, gasoline prices rose by 34.4% in Australia and 14.9% in Japan, while Korea's increase was only 12.2%.
Price controls are also putting direct pressure on the on-site distribution structure. After implementing the price ceiling last month, the government conducted special inspections at 4,851 gas stations and uncovered 85 violations. In cases where prices were found to have been unfairly raised, the violations were immediately reported to the relevant local governments, with the government responding on a zero-tolerance basis.
Jang Taehoon, a researcher at the Korea Energy Economics Institute, explained, "In addition to implementing the price ceiling, the government has significantly tightened supervision over gas station sales prices, forcing gas stations into a structure where they inevitably earn lower margins than usual. As a result, profitability has worsened, which could fuel greater discontent within the industry."
![[The Paradox of the Price Ceiling]③Global Oil Prices Rise as Korea Moves in the Opposite Direction... Refinery Industry Losses Snowball](http://www.asiae.co.kr/news/img_view.htm?img=2026041614180628912_1776316687.png)
Ultimately, the burden of the price suppression policy is being shifted onto refiners. Caught between higher import costs for crude oil and suppressed domestic prices, refiners are increasingly concerned about large-scale losses. An industry official stated, "Refiners are already facing the significant impact of a stronger dollar, and since crude oil payments must be made in dollars, large-scale foreign exchange losses and other financial losses are unavoidable."
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