President Lee Jae-myung said at the Cabinet meeting and emergency economic review meeting on the 14th that "because of the oil price cap, fuel prices have fallen and consumption is actually increasing," adding that "consumption cuts are needed." The government's move to suppress prices has eased the public's burden, but it effectively acknowledged a limit that the incentive to save energy could weaken.
According to a recent analysis by the International Energy Agency (IEA), price caps are not a common energy crisis response in Organization for Economic Cooperation and Development (OECD) countries. The OECD recommended applying the "T·E·P principle," which sets clear targets for fiscal support and keeps it temporary, when designing energy crisis response policies.
◇ IEA: "15 countries, including Korea, implementing 'price caps'"
According to the "2026 Energy Crisis Policy Response Tracker" the IEA released on the 14th, the number of countries implementing "price caps" after the Middle East crisis stands at 15, including Korea. They are Japan, China, Austria, Barbados, Chile, Croatia, the Czech Republic, Hungary, Mexico, Mozambique, Poland, Serbia, Thailand, and Timor-Leste.
Among the 38 OECD members, only eight (21%) were using policies to suppress prices. The OECD recently said, "As of early April, the main response by OECD countries was fuel tax cuts to lower prices at gas stations," adding, "Price caps and direct income support were also introduced, but they were relatively small in scale."
Many countries appear not to have chosen to intervene directly in prices because of the side effect that "the factor for reducing demand weakens." In fact, after the oil price cap was first implemented on the 13th of last month, gasoline and diesel sales at gas stations increased week over week for two consecutive weeks. Weekly sales rose from 610,000 kiloliters (kL) in the second week of March to 640,000 kL in the third week of March and 730,000 kL in the fourth week of March. However, the Ministry of Trade, Industry and Resources said, "In April, sales actually declined."
◇ OECD's energy policy advice: "Wasteful fiscal spending during the Russia-Ukraine war was high"
So what is a reasonable energy crisis response policy? In a report released on the 13th, the OECD said countries should keep in mind the lessons from the 2022–2023 energy crisis triggered by the Russia-Ukraine war when crafting energy crisis responses.
According to the OECD, as international oil prices surged during the Russia-Ukraine war, 41 countries announced about $400 billion in energy support measures in 2022 and about $405 billion in 2023. By the OECD median, that amounts to 0.7% of gross domestic product (GDP) in 2022 and 0.8% in 2023. The OECD said, "Public finances are in worse shape now than they were then."
The OECD recommended that countries pursue energy policies applying the "T·E·P principle." T·E·P stands for ▲ Targeting to help contain fiscal costs ▲ Ensuring support is temporary ▲ Preserving incentives to save energy.
"Targeting" means clearly defining and supporting energy-vulnerable groups. Next, "temporary" means setting a clear end date. The OECD also said governments should support only up to an appropriate level of consumption so that policies do not inadvertently encourage overconsumption. The International Monetary Fund (IMF) also released a recent report saying, "Given fiscal conditions, clearly identify vulnerable groups to support in connection with the recent rise in energy prices, and provide support on a temporary basis."
The Korean government has reflected an initial six months' worth (4.2 trillion won) of fiscal needs for the oil price cap through a supplementary budget. However, as the plan is to respond with next year's budget if the war drags on, the end date of the program and the criteria for scaling it back remain unclear. The OECD's message is that, ultimately, the conditions for ending it should be made concrete, and this should be followed by consideration of how to shore up incentives to conserve demand.