South Korea’s fuel price cap in response to oil price surging

South Korea is preparing to impose a ceiling price on fuel products for the first time in 30 years after oil prices increased rapidly on Monday due to the war in Iran.

At a briefing on Monday, President Lee Jae Myung said the government would “quickly implement” the fuel price cap, adding that Seoul would explore ways to diversify its energy import sources, according to a TV broadcast.

Oil prices rose on Monday as major producers in the Middle East cut production and the United States called on Tehran. “unconditional surrender” throughout the weekend.

Brent futures It rose 13% to $104.7. US West Texas Intermediate crude futures It rose 30% to $118.46 before paring gains in the last trade, up 13% to $102.4. The 30% increase is the biggest one-day gain since late 1988, according to LSEG data.

“We must quickly introduce and boldly implement the maximum price system for petroleum products, which have seen extreme price increases recently,” Lee said.

South Korean media outlet Yonha reported The average price of gasoline in Seoul exceeded 1,900 won ($1.28) per liter for the first time in nearly four years on Friday and rose to 1,945 won on Sunday, it said.

“We need relevant emergency measures. We must cooperate with strategic partners to quickly identify alternative supply lines that do not pass through the Strait of Hormuz,” Lee said.

Over the weekend, US President Donald Trump struck a defiant tone in the face of rising prices, saying the “short-term increase in oil prices” was “a very small price to pay” for eliminating Iran’s nuclear threat.

“Only fools think differently!” Trump added.

During the briefing, South Korea’s president said the crisis in the Middle East was placing a “significant burden” on his country’s economy, which is heavily dependent on trade and energy imports from that region.

He also called on authorities to “proactively respond” to increasing volatility in financial and foreign exchange markets.

The country’s reference point last week kospi It saw wild swings and had its worst day on record with a 12% drop on Wednesday, before rising back to 10% on Thursday and falling again on Friday and Monday.

Lee urged authorities to “actively expand” 100 trillion won market stabilization programIf necessary, “proactively prepare additional measures at the government and central bank level.”

Stabilization program Lee ordered last week Launched on March 6and designed to calm capital markets.

However, Korean Economic Daily reported. South Korea’s president warned officials should avoid buying stocks in a way that would distort the market, saying the program was not designed to artificially prop up stock prices.

Japan’s government has also reportedly instructed a national oil reserve storage facility to prepare for the release. crude stocks, According to Reuters on Sunday.

Reuters, citing a senior Japanese parliament member, said details such as the timing of the announcement remained unclear.

Japan has the equivalent of emergency oil reserves 254 days domestic consumption As of February, according to government data.

On Friday, Vietnam announced it would change import duties on imports related to Reuters reports that the Southeast Asian country will produce fuel products to ensure energy security. scrap import taxes for fuel.

Asian economies are particularly vulnerable to oil disruptions. 5 March report by the Atlantic Council.

Although China is the world’s largest oil importer, it has more domestic oil production than countries such as Japan, South Korea and Taiwan.

“Its economy is as oil-intensive as that of Japan or Taiwan, and far less so than that of South Korea,” the Atlantic Council said, adding: “Accordingly, while an oil crisis would bring real pain, it could strengthen Beijing relative to its regional rivals.”

— CNBC’s Blair Baek contributed to this report.