Seoul, April 23 — South Korea has extended its fuel price cap system for another two weeks, keeping maximum retail prices on gasoline, diesel, and kerosene unchanged as the government cited ongoing global energy market instability and the need to manage domestic fuel demand. The decision, announced on Thursday by the Ministry of Trade, Industry and Resources, marks the second consecutive freeze of price ceilings under a system introduced in mid-March 2025.

Current Price Ceilings Remain Frozen

Under the extended freeze, oil refineries supplying fuel to gas stations across South Korea must continue adhering to the following maximum prices: 1,934 won (approximately US$1.3) per litre for regular gasoline, 1,923 won per litre for diesel, and 1,530 won per litre for kerosene.

These caps are reviewed and reset on a bi-weekly basis under the government's price stabilization framework. The system was originally launched to shield South Korean consumers from sharp fuel price spikes driven by geopolitical tensions in the Middle East.

Why the Government Chose to Maintain the Cap

Nam Kyung-mo, policy advisor to the industry minister, clarified that despite a notable decline in international fuel prices over the past two weeks — with global gasoline prices falling roughly 8 percent, diesel by 14 percent, and kerosene by 2 percent — the government is not yet considering scrapping the cap system.

Nam cited the fragile ceasefire between the United States and Iran as a key source of uncertainty, noting that domestic fuel prices remain significantly elevated compared to pre-war levels. The advisor's remarks came a day after the prime minister suggested the government would carefully review whether to continue the measure.

Without the price ceiling system, Nam stated that gasoline would have been priced at around 2,200 won per litre, diesel at 2,800 won, and kerosene at 2,500 won — far above current capped levels, illustrating the direct financial relief the policy provides to consumers.

Fiscal Compensation for Oil Refineries

The government has reaffirmed its commitment to provide fiscal compensation to domestic oil refineries that incur financial losses as a direct result of the mandatory price ceiling. This measure is intended to ensure that refineries continue stable supply operations without absorbing undue financial burdens from the regulatory cap.

The compensation mechanism is a critical component of the system's sustainability, as it prevents supply-side disruptions that could otherwise arise if refineries were forced to sell below market rates without relief.

Industrial Materials Supply Remains Stable

In a broader update on supply chain stability, the Ministry of Trade, Industry and Resources confirmed that no disruptions have been recorded in the supply of key industrial materials. Sectors including semiconductors, automobiles, and shipbuilding continue to operate without interruption, with South Korea successfully importing alternative sources of critical inputs such as helium and hydrogen bromide.

On the medical supply front, the ministry noted that adequate stockpiles of IV solution packaging materials, syringes, and medical gloves have been secured, ensuring continuity in the healthcare sector amid ongoing global supply chain pressures.

What to Expect Next

The fuel price cap system will be reviewed again within the next two weeks, with the government's decision likely hinging on developments in the US-Iran geopolitical situation and the trajectory of international crude oil prices. Analysts and industry stakeholders will closely watch whether Seoul begins phasing out the intervention as global energy markets show signs of stabilization or opts for a further extension if volatility persists.