South Korea will cap domestic fuel prices and seek alternative energy sources as the Middle East conflict disrupts supplies and burdens the import-dependent economy.
SEOUL: South Korea will impose a cap on domestic fuel prices for the first time in nearly 30 years to shield its economy from soaring global energy costs.
President Lee Jae Myung announced the measure, stating the government would “swiftly introduce and boldly implement” a maximum price system on petroleum products.
The move responds to a significant spike in crude prices following the conflict in the Middle East.
Lee called the crisis a major burden for an economy highly dependent on global trade and Middle East energy imports.
He added that South Korea will also seek energy sources beyond those shipped via the critical Strait of Hormuz.
Presidential policy adviser Kim Yong-beom said the industry ministry aims to implement the price cap system within this week.
He noted the maximum price could be adjusted every two weeks and that South Korea has oil reserves sufficient for 208 days of consumption.
Kim stated that around 1.7 million barrels per day of crude shipments to South Korea are affected by the Strait of Hormuz blockade.
The country could secure 20 million barrels from jointly held stocks with oil-producing nations and divert overseas production for domestic use.
Regarding natural gas, Kim said 14% of this year’s imports are from the Middle East, with about 5 million tons from Qatar expected to be disrupted.
He assured that domestic supplies are unlikely to be hit as importers can source from alternatives.
When asked about a potential supplementary budget for a prolonged crisis, Kim said additional financial resources would need serious consideration.
Earlier, President Lee said a 100 trillion won market stabilisation programme should be expanded if necessary.
He called on the government and central bank to prepare more measures to respond to financial and foreign exchange market volatility.
South Korean markets slumped sharply on Monday.
The benchmark KOSPI closed 6% lower after falling as much as 9%, triggering circuit breakers for a second time this month.
The won weakened nearly 1% to trade near 1,500 per dollar, while the benchmark bond yield hit more than two-year highs.
