South Korea to cap fuel price starting Friday to ease consumer burden

South Korea said on Thursday that it will cap ‌domestic fuel prices starting on Friday to combat a spike in energy costs stemming from the conflict in the Middle East.

The move comes as South Korea is scrambling to cushion the impact of the Middle East energy crisis on Asia's fourth-biggest economy, which is reliant on imports for its energy needs.

South Korea set the maximum wholesale price for gasoline at 1,724 won ($1.17) per liter, below Wednesday’s level of 1,833 won, for example. It will adjust these prices every two weeks to reflect changes in global oil prices.

"The government will implement a maximum price system for petroleum products to ease the burden on consumers and firmly respond to attempts to take advantage of the crisis to increase prices excessively," Finance Minister Koo Yun-cheol said.

The maximum prices will be determined based on pre-Iran crisis supply prices, global oil prices, and taxes, the government said.

South Korea relies almost totally on imports for its energy, buying about 70% of its oil and 20% of its LNG from the Middle East, according to Korea International Trade Association data.

South Korea will also restrict the stockpiling of petroleum products, requiring refiners to release at least 90% of the monthly volume of petroleum products they released in March and April a year earlier, according to the finance ministry.

The government said it will provide financial support to refiners which report losses stemming from the price cap.

($1 = 1,478.6700 won)

-Reporting by Hyunjoo Jin and Jihoon Lee, Editing by Louise Heavens and Sharon Singleton/Reuters