The government said on the 26th it will cut the petroleum price cap by 150 won per liter (L) from midnight for four weeks. Based on refiners' supply prices, the capped prices are 1,784 won per L for gasoline, 1,773 won for diesel and 1,380 won for kerosene.
This is the first cut to the price cap since the government implemented the petroleum price cap system in March. The move reflects international oil prices falling back to prewar levels after a Middle East war cease-fire deal was reached. Still, the government said it will keep the price cap system until domestic retail petroleum prices stabilize.
Koo Yun-cheol, Deputy Prime Minister and Minister of Economy and Finance, chaired a task force (TF) meeting on special management of livelihood prices the same day and said, "We will reduce (the petroleum price cap) from the current level, but keep the system until petroleum consumer prices stabilize."
According to the Ministry of Trade and Industry (MOTI), international oil prices topped $100 per barrel right after the Middle East crisis, then fell to the low-to-mid $70s. Dubai crude fell from $94 per barrel in the first week of June before the cease-fire deal to $64 on the 25th, Brent from $95 to $75, and West Texas Intermediate (WTI) from $93 to $72.
However, the nationwide average gasoline price at gas stations rose from 1,500–1,600 won before the Middle East crisis to the 2,000-won range after the war and remains at a similar level now. The average diesel price is also in the 1,990-won range, higher than before the Middle East war. Because gas stations receive petroleum products with a lag of two to three weeks, declines in international oil prices are not immediately reflected in retail prices.
With the cut to the petroleum price cap, the government expects the average gasoline retail price at gas stations to drop from the current 2,000-won range per L to the 1,800-won range. A government official said, "It takes time until the existing fuel inventory (secured by gas stations) is exhausted, so there may be some lag in price cuts at gas stations," adding, "We will closely inspect gas stations that intentionally delay price cuts on the grounds that they still have inventory."
The government will jointly monitor prices and volumes at more than 10,000 gas stations nationwide with consumer groups and public institutions, and will crack down on illegal gas stations through on-site inspections by a "pan-ministry market inspection team," taking strict action.