Global oil prices plunge, but Korean drivers see little relief
Crude prices have dropped more than 30 percent, but Korean drivers are seeing little relief as supply lags, price controls and Strait of Hormuz risks keep pump prices elevated.
Fuel prices are seen at a petrol station in Korea on June 15.YONHAP
Global oil prices have fallen more than 30 percent over the past month as the war between the United States and Iran wound down, but gasoline in Korea still costs close to 2,000 won per liter ($5 a gallon).
Part of the gap is the lag before cheaper crude reaches Korean gas stations. A possible Iranian toll on ships passing through the Strait of Hormuz could keep prices from easing much further.
Opinet, the oil price information system run by the Korea National Oil Corporation, put the price of Dubai crude at $73.61 per barrel on Friday, down from $106.60 per barrel a month earlier, on May 20. That is a drop of 30.9 percent. Dubai crude, traded on the Singapore spot market, is the benchmark for Korea's crude imports.
Oil had neared $170 a barrel at the height of the war. Since the United States and Iran signed an agreement on Wednesday to end the war, prices have returned to around the $70 level that prevailed just before the fighting began in late February.
Pump prices, however, have barely moved. The average price of gasoline at Korean gas stations slipped to 2,009 won per liter from 2,011 won over the same period, remaining essentially flat.
Refiners expect the drop in crude to eventually ease prices at the pump, but say drivers will not feel it for weeks. It takes about a week for changes in international oil prices to show up in refiners' supply prices, then another one to two weeks to reach gas stations. The recent declines should start to register in earnest in early to mid-July.
The government's price cap is another reason the decline will be muted. Because the government held down increases when crude was surging, prices have less room to fall now that it is dropping.
"The decline in international oil prices will have a positive effect on stabilizing domestic prices," an industry official said. The official added that many variables remain, including the exchange rate and global petroleum-product prices, which make it hard to predict where prices will settle.
Fuel prices are displayed at a gas station in Seoul on May 12.NEWS1
Gasoline and diesel have remained near 2,000 won per liter since the war in Iran began. The national average for gasoline broke back above 2,000 won on April 17, the first time it had reached that level in about three years, dating back to the early days of the Russia-Ukraine war.
Even with the ceasefire and an eventual end to the price cap, the industry does not expect a quick return to prewar prices. International petroleum-product prices remain high, and taxes and distribution margins feed into the pump price. Geopolitical risk in the Middle East also lingers, and oil prices could turn volatile again.
The other wild card is whether Iran charges a toll on the Strait of Hormuz. Korea leaned on the Middle East for about 70 percent of its crude imports last year, leaving it exposed to any change in the strait.
The U.S.-Iran memorandum of understanding bars any separate fee on ships passing through the strait for the next 60 days. Iran is reported to be weighing a transit charge structured as an insurance fee once that window closes.
About 20 percent of the world's seaborne crude moves through the Strait of Hormuz. A toll would raise shipping costs and could cancel out much of the recent drop in oil prices.
Even if crude holds steady, higher transport costs could limit how much further pump prices in Korea can fall.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
