[The Paradox of the Price Ceiling]④"Ending Price Controls Would Increase the Burden on Vulnerable Groups... Fuel Taxes Must Be Lowered and Selective Support Provided"

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This issue stems from the judgment that simply suppressing prices cannot simultaneously resolve market distortions and fiscal burdens. Experts believe that instead of a single approach focused solely on price controls, a multifaceted response involving tax policy, fiscal measures, and market structure adjustments is necessary. The first alternative most experts point to is a reduction in fuel taxes. Although the government expanded the gasoline fuel tax cut from 7% to 15% and the diesel tax cut from 10% to 25% on March 26, experts agree that it is time for even greater adjustments.

Former Commissioner of Statistics Korea, Yoo Kyungjoon, said on April 17, "The government should play a buffering role through the fuel tax," adding, "It was problematic to remain passive in adjusting the fuel tax even while organizing a supplementary budget." He emphasized, "A significant reduction in the fuel tax is the most fundamental prescription."

Hong Seokcheol, professor of economics at Seoul National University, also commented, "Rather than artificially suppressing prices, it is more effective to partially reflect market prices while minimizing side effects through fuel tax adjustments." A fuel tax reduction is considered more market-friendly than the current price ceiling system, as it can lower the burden on consumers without disrupting suppliers' decision-making or distorting price signals.

Lee Hong, associate research fellow at the Korea Institute for Industrial Economics & Trade, explained, "Although a limitation is that the tax cut may not be fully passed on to gas station retail prices, the approach has fewer side effects than the price ceiling policy because it maintains price signals."

There is growing consensus that tax adjustments alone cannot deliver policy effects evenly across all groups, and that fiscal spending methods must also change. Instead of uniformly lowering prices, the approach should directly target those most affected by the burden. This means selective support for vulnerable groups and industries. Under the current system, all consumers who purchase fuel receive the same benefit per liter, so higher-income groups with greater fuel consumption receive a larger absolute benefit. Lee, the associate research fellow, said, "If energy vouchers or oil price-linked subsidies are provided to industries with high fuel cost ratios, such as freight transport, fisheries, agriculture, and public transportation, it would deliver a much greater welfare improvement than the price ceiling using the same fiscal resources."

Former Commissioner Yoo described this as a concept of "selective reimbursement." He said, "Letting the market set prices while providing vouchers or cash directly to low-income groups and small business owners who operate vehicles for their livelihoods is much more efficient." Regarding the latest supplementary budget, he also criticized, "Although it was described as a war-time budget, nearly half of the 25 trillion won in total supplementary spending was allocated to cash-based support for livelihoods," adding, "More focus should have been given to energy-related living cost support and supply chain stabilization." Professor Hong also emphasized, "It is more effective to provide targeted direct support to heavily burdened groups and industries through voucher payments or fuel tax adjustments."

There is also a call for structural responses that go beyond short-term remedies. The judgment is that simply controlling or subsidizing prices is insufficient to cope with recurring energy price fluctuations. Lee, the associate research fellow, suggested, "We should increase our resilience to supply shocks by releasing oil reserves and diversifying crude oil import sources." Currently, domestic oil reserves amount to 208 days' worth based on International Energy Agency (IEA) standards, and timely utilization of these reserves is considered a more market-friendly means of supply stabilization than price controls.

A structural issue cited was the problem of price asymmetry in the domestic petroleum market. While international oil price increases are reflected in the market price rapidly, decreases are reflected much more slowly. This was one of the factors behind the implementation of the price ceiling policy. Lee pointed out, "The price ceiling only suppresses the result, which is high prices, but does not address the underlying market structure." He cited Austria's 2009 regulation, which limited gas station price increases to once per day and led to a reduction in gasoline prices of about 23%, as an example, emphasizing, "An approach that regulates price adjustment behaviors, rather than price levels, is a sustainable alternative even after a crisis."

Professor Hong also highlighted the structural distrust issues revealed by this incident. "People perceive that price decreases are not felt when international oil prices fall, but increases are immediately reflected, and the large price differences between gas stations contribute to accumulated distrust in the price formation process," he said. "This is an opportunity to create a more transparent price structure, which is the fundamental solution."

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