Seoul Gasoline Price Nears 1,700 Won... Will Inflation Strike Back After Seol Holiday?

As the Middle East conflict prolongs and international oil prices fluctuate, the nationwide gasoline price has risen to the 1,600 KRW per liter range for the first time in two months, with gasoline prices in the Seoul area approaching the 1,700 KRW mark. With the government's measures to suppress prices ending before the Lunar New Year, there is a possibility that prices may rebound after the holiday.

According to Opinet, the oil price service of the Korea National Oil Corporation, gasoline prices are currently recorded at 1,605.3 KRW per liter. It has been about two months since the nationwide average gasoline selling price entered the 1,600 KRW range, last seen in December. Diesel prices also surpassed 1,500 KRW for the first time in six weeks, reaching 1,501.49 KRW on the 6th.

This is due to the international oil prices rising amid the prolonged Middle East conflict. International oil prices typically reflect in domestic gasoline prices with a 2-3 week lag. As concerns over the spread of the Middle East conflict intensified, including the first U.S. military casualty, international oil prices have risen for five consecutive trading days recently. On the 9th (local time), March delivery West Texas Intermediate (WTI) crude oil closed at $76.84 per barrel on the New York Mercantile Exchange, up $0.62 from the previous day. On the London exchange, April delivery Brent crude traded at $82.19 per barrel.

With oil prices having risen sharply in a short period, concerns over price increases are further heightened as the fuel tax reduction measures are set to end around the end of this month after the Lunar New Year. The fuel tax reduction, first introduced in 2011, has been extended seven times. Currently, the temporary fuel tax reduction applies a 25% cut on gasoline and a 37% cut on diesel and LPG butane. This results in a price reduction effect of 205 KRW per liter for gasoline and 212 KRW for diesel. Once the measure ends, gasoline prices currently in the 1,600 KRW range are expected to jump to the 1,800 KRW range, and diesel prices to the 1,700 KRW range.

Since the government has been making all-out efforts to lower prices before the Lunar New Year, prices that have been suppressed so far may surge after the holiday. The government has poured over 60 billion KRW in support funds to reduce prices of fruits such as apples and pears. Despite these efforts, according to the Korea Agro-Fisheries & Food Trade Corporation, the wholesale price of 10 kg of apples, a Lunar New Year staple, was 84,660 KRW as of the 8th, a 97% increase compared to a year ago. Pears also saw a roughly 72% increase, with the wholesale price of 15 kg reaching 78,860 KRW.