South Korea plans to implement a price cap on domestic gasoline and diesel prices, South Korean president Lee Jae-myung said during an emergency economic review meeting on 9 March, held in response to escalating disruptions from the US–Iran war.
Domestic gasoline and diesel prices climbed sharply to 1,889 South Korean won/litre ($1.28/litre) and W1,910/litre, respectively, on 7 March, driven by expectations of higher import costs — despite the fact that more expensive supplies have not yet been imported into the country.
In response, the president instructed officials to implement a "maximum price system" as quickly as possible, according to briefing notes from Kim Yong-beom, chief of staff to the president.
Authorities will also step up monitoring of the domestic oil market. Relevant agencies will conduct tax audits and inspections to detect potential price collusion or counterfeit oil.
The South Korean government sought to ease crude supply concerns, noting that South Korea holds 190mn bl of oil reserves, sufficient for 208 days of consumption. The government also has the right of first refusal to acquire an additional 20mn bl currently held by oil producing countries, it said. It will work with private refiners to establish alternative supply channels to offset disruptions from the Mideast Gulf, it added.
South Korea is a major exporter of refined products in Asia-Pacific, but refiners are holding back their April-loading programmes because of continued uncertainty over crude feedstock availability given the US–Iran conflict, according to several refining sources surveyed by Argus.
The fear of limited prompt supplies has driven up prompt timespreads to record levels, according to Argus pricing data. The balance March-April spread for the Singapore 92R Singapore and 10ppm gasoil rose to $16.50/bl and $26/bl in backwardation, respectively.
But some refiners — GS Caltex, SK Energy and S-Oil — are undergoing turnarounds in March–April, which has softened the immediate impact of tighter feedstock availability. They would have already secured sufficient product ahead of the maintenance period, so there may be some relief when they return in April, said a Singapore-based gasoline trader. But that remains unclear as no April-loading cargoes have been issued yet.
