ISSUE BRIEFING

Gasoline Prices Heading Down to the 1,800-Won Range? Government Cuts Maximum Oil Prices for the First Time

The South Korean government has lowered the 7th ceiling of the maximum oil pricing system—introduced after the Middle East war—by 150 won per liter for the first time, bringing gasoline down to 1,784 won, diesel to 1,773 won, and kerosene to 1,380 won. This adjustment reflects easing tensions in the Middle East, including falling international oil prices and the normalization of navigation through the Strait of Hormuz, marking the first downward revision in 105 days since the system's implementation. While the government expects pump prices for gasoline to drop from the early 2,000-won range to the 1,800-won range, there may be a time lag before consumers feel the impact due to existing high-priced inventories. The maximum pricing system has been praised for its inflation-defense effects while simultaneously facing criticism for side effects such as distorted price signals, refinery losses, and expanding fiscal burdens. The government does not plan to terminate the system immediately and will apply the 7th pricing tier for 4 weeks, though discussions on an exit strategy could gain traction depending on future oil price stability and supply chain normalization.