Price at the pump drops below 2,000 won threshold

Gasoline prices in Korea dropped below 2,000 won per liter ($4.90 per gallon) for the first time in more than two months as lower government price caps and falling global oil prices began filtering through to consumers.

The nationwide average retail price stood at 1,986.26 won per liter for gasoline and 1,980.24 won per liter for diesel as of 3 p.m. Sunday, according to the Korea National Oil Corporation's Opinet fuel price information system.

The average gasoline price fell below the 2,000 won mark for the first time since April 17 after dropping to 1,996.1 won on Saturday, and declined further on Sunday.

The drop in retail prices is widely attributed to the government's seventh fuel price cap, which took effect at 12 a.m. on Saturday and lowered the maximum allowable price by 150 won per liter.

The government expects average gasoline prices to fall into the 1,800 won-per-liter range once the latest price cap reduction is fully reflected at gas stations. However, the impact is expected to emerge gradually over the next two to three weeks as stations sell off fuel inventory bought at higher prices.

Global crude oil and refined fuel prices have also declined rapidly following the signing of a memorandum of understanding between the United States and Iran aimed at ending their conflict.

The spot price of Dubai crude, which accounts for most of Korea's crude oil imports, fell to $64.40 a barrel on Thursday, below its preconflict level of $71.24 on Feb. 27.

The Mean of Platts Singapore, the benchmark used to price petroleum products such as gasoline in Korea during normal market conditions, also declined. The gasoline benchmark stood at $98.50 per barrel on Friday, its lowest level since March 4, when it was $99.66 per barrel.

Uncertainty in the Middle East, however, remains a risk.

Tensions escalated again after Iran attacked commercial vessels transiting the Strait of Hormuz on Thursday and the United States responded by striking Iranian missile and drone bases.

Renewed escalation in the region could once again increase volatility in global oil prices.

BY AHN HYO-SEONG [[email protected]]