South Korean President Lee Jae Myung said on Monday that authorities would cap domestic fuel prices for the first time in nearly 30 years to contain a spike in prices after the conflict in the Middle East sent global crude prices sharply higher.
Speaking at an emergency meeting on the impact of the Middle East crisis, Lee said the government would "swiftly introduce and boldly implement" a maximum price system on petroleum products "that have recently seen excessive price increases".
Advertisement
The current crisis "is a significant burden on our economy, which is highly dependent on global trade and energy imports from the Middle East," Lee said in opening remarks.
He added that South Korea will also look for sources of energy beyond supplies shipped via the Strait of Hormuz.
Presidential policy adviser Kim Yong-beom said after the meeting that the industry ministry would proceed quickly so that the price capping system could be implemented as soon as this week.
The maximum price could be changed every two weeks, he said, noting South Korea had sufficient oil reserves to meet 208 days of consumption.
MARKET SLUMPS AGAIN
The amount of crude oil shipped to South Korea affected by the Strait of Hormuz blockade is around 1.7 million barrels per day, Kim said.
South Korea could secure 20 million barrels of crude stock it jointly stores with oil-producing countries if it exercises the right to buy, Kim said, as well as divert overseas production by the state-run Korea National Oil Corp for domestic use.
Kim said 14% of natural gas due to be imported this year is from the Middle East, with about 5 million tons of Qatari gas imports expected to be disrupted. Domestic supplies are unlikely to be hit, however, since Korea Gas Corp and other players could import from alternative sources, he said.
When asked if a supplementary budget might be drawn up in case the Middle East crisis is prolonged, Kim said: "If any additional financial resources are needed... we have to seriously think about it."
Earlier on Monday, President Lee said a 100 trillion won (US$66.94 billion) market stabilisation programme should be expanded if needed, and called on the government and the central bank to prepare additional measures to respond to the volatility of the financial and foreign exchange markets.
The benchmark KOSPI .KS11 closed 6% lower on Monday, after falling as much as 9% to trigger circuit breakers for a second time this month. The won KRW= weakened nearly 1% to trade near a psychological barrier of 1,500 per dollar, while the benchmark bond yield hit more than two-year highs.
