Domestic oil refiners suffocate from pressure as gov't moves to curb surging fuel prices
Published: 13 Mar. 2026, 18:21
![Fuel prices are displayed on a board outside a gas station in Seoul on March 12. [NEWS1]](https://koreaseafood.online/data/photo/2026/03/13/b3516eca-f2b3-4f5d-8177-7c054619d62f.jpg)
Fuel prices are displayed on a board outside a gas station in Seoul on March 12. [NEWS1]
Domestic oil refiners are suffocating from the pressure as the government and the ruling party move to curb surging fuel prices triggered by the Middle East crisis — from a fuel price cap to investigations into possible collusion and the revival of a windfall tax bill.
A petroleum price cap took effect at midnight on Thursday, according to the Ministry of Trade, Industry and Resources. The first cap sets the maximum retail price at 1,724 won per liter ($4.36 per gallon) for regular gasoline, 1,713 won for automotive diesel and 1,320 won for kerosene.
Compared to the average supply prices submitted by refiners on Wednesday, the caps are 109 won lower for gasoline, 218 won lower for diesel and 408 won lower for kerosene. The government plans to reset the cap every two weeks.
Exports of petroleum products have also been restricted so they do not exceed the level recorded during the same period last year. The measure is intended to prevent refiners from redirecting supplies overseas if domestic prices fall.
“The country’s four refiners will faithfully participate in the government’s fuel price stabilization measures, including the price cap, to stabilize domestic petroleum supply and ease the burden of fuel costs on the public amid prolonged instability in the Middle East,” the Korea Petroleum Association said in a statement, referring to the country's major refiners: SK Energy, GS Caltex, HD Hyundai Oilbank and S-Oil.
Behind the scenes, however, the industry is growing increasingly concerned.
![Tankers sail near the Strait of Hormuz as seen from Ras al-Khaimah, the United Arab Emirates, on March 11 amid the U.S.-Israeli conflict with Iran on March 11. [REUTERS/YONHAP]](https://koreaseafood.online/data/photo/2026/03/13/dcd973b2-ba26-4c2d-b0d1-3d9783c6e2bb.jpg)
Tankers sail near the Strait of Hormuz as seen from Ras al-Khaimah, the United Arab Emirates, on March 11 amid the U.S.-Israeli conflict with Iran on March 11. [REUTERS/YONHAP]
Lawmakers from the ruling party have recently reintroduced a so-called windfall tax bill that would impose additional taxes on excess profits generated by oil price volatility.
If the Strait of Hormuz remains blocked and global oil prices continue to rise, refiners’ refining margins — the difference between crude costs and final product prices — could improve, potentially boosting operating profits.
At the same time, the Fair Trade Commission has launched an investigation into possible collusion among the four refiners, adding pressure on the industry.
But the rising uncertainty is the main driver behind the industry’s fears.
“Refining margins tend to increase when global oil prices rise, but what matters more is volatility,” one industry source said. “Prices need to rise gradually for companies to establish mid- and long-term management plans. Sudden spikes caused by unexpected events only increase uncertainty.”
“A prolonged blockade of the Strait of Hormuz could disrupt crude oil supply itself,” another industry insider said.
![The Callisto tanker sits anchored in Port Sultan Qaboos in Muscat, Oman, on March 12 as the traffic is down in the Strait of Hormuz amid the U.S.-Israeli conflict with Iran. [REUTERS/YONHAP]](https://koreaseafood.online/data/photo/2026/03/13/8e40df70-4fc7-4701-940c-37f273fb8eb5.jpg)
The Callisto tanker sits anchored in Port Sultan Qaboos in Muscat, Oman, on March 12 as the traffic is down in the Strait of Hormuz amid the U.S.-Israeli conflict with Iran. [REUTERS/YONHAP]
Refiners will be able to receive compensation for losses incurred due to the implementation of the price cap system on a post hoc basis, the government said.
Each company will calculate its losses based on internal cost structures and request settlement after an audit by a certified accounting firm. The government will then verify the claims through a special settlement committee before providing compensation.
However, skepticism remains over whether the government’s limited budget could fully cover losses if a blockade on the Strait of Hormuz persists for an extended period.
Above all, refiners themselves must prove the extent of losses, and the government has yet to specify clear standards for compensation and the size of the funding pool.
The verification process could also generate significant administrative costs. The government plans to form a committee of petroleum experts, including accountants, legal specialists and academics, to review claims, but that process could take months.
![Fuel prices are displayed on a board outside a gas station near Pyeongtaek, Gyeonggi, on March 12. [NEWS1]](https://koreaseafood.online/data/photo/2026/03/13/acaf1977-c0b8-4fc5-993f-4ad3e9bfd47e.jpg)
Fuel prices are displayed on a board outside a gas station near Pyeongtaek, Gyeonggi, on March 12. [NEWS1]
“Since the government cannot simply pay the entire amount claimed by refiners, thorough verification is necessary,” said Yoo Seung-hoon, a professor of future energy convergence at Seoul National University of Science and Technology. “For past cost verification work of a similar nature, it required 20 to 30 experts and took several months. The same could happen this time.”
“Since the compensation is being provided through the budget, issues of equity could also arise regarding citizens who do not purchase gasoline or diesel, such as those who do not own cars or drive EVs,” Prof. Yoo added.
There are also worries that government price controls could create unintended consequences. At the early stage of implementation, panic buying could trigger excess demand. Additionally, the cap could act as a reference point that pushes market prices upward toward the ceiling.
The Bank of Korea previously noted that a price cap could temporarily ease consumer burdens but warned that prolonged implementation could increase side effects, such as excess demand.
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.
BY NA SANG-HYEON [[email protected]]
with the Korea JoongAng Daily
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