Oil Drops Back to Prewar Levels; South Korea Reviews Lower Fuel Price Caps

South Korea is reviewing a plan to lower fuel price caps after international oil prices fell back to levels seen before the US-Iran war, a move aimed at easing pressure on domestic prices.

According to the Ministry of Trade, Industry and Energy on June 26, Brent crude futures stood at $73.14 a barrel as of 8 a.m. the previous day, close to the $72.48 level seen just before the war.

West Texas Intermediate crude fell below $70 to $69.92 a barrel, while Dubai crude was at $67.29, below its prewar level.

Domestic gas station prices, however, remain high. The nationwide average price for gasoline is 2,007 won a liter, while diesel averages 1,998 won a liter. Both have stayed around 2,000 won since April.

The government sees the market structure, under which gas stations typically sell inventory supplied two to three weeks earlier before adjusting prices, as one reason for the slow decline. Officials also view the current fuel price cap system as a factor delaying the drop.

South Korea introduced the fuel price cap system in March to respond to a spike in oil prices. The current caps have remained in place since a second adjustment in late March: 1,934 won a liter for gasoline, 1,923 won for diesel and 1,530 won for kerosene.

President Lee Jae-myung told a senior aides' meeting the previous day to move quickly on measures to stabilize petroleum prices, including adjustments to the cap system.

Industry Minister Kim Jung-kwan said there is room to lower the caps given current oil prices and that related measures are under review.

Han Kyung-woo, Hankyung.com reporter case@hankyung.com