Impact of Middle East crisis, domestic oil prices surge sharply within one day

The situation in the Middle East has become tense again, and domestic gas station fuel prices have widened their increase within a single day. After the United States and Iran’s first peace negotiations broke down, international oil prices surged sharply, and recently stagnant domestic gasoline and diesel prices have also resumed an upward trend.

According to the oil price information system Opinet data on the 13th, the average nationwide gas station gasoline price at 4 p.m. was 1,994.9 won per liter, up 2.2 won from the previous day. The diesel price was 1,988.8 won, an increase of 2.5 won. Considering that the baseline increase at 9 a.m. that day was 1.1 won for gasoline and 1.2 won for diesel, this means that the price increase momentum became steeper within just 7 hours. Seoul also shows a similar trend. The average gasoline price in Seoul is 2,025.9 won per liter, up 1.4 won; diesel is 2,011.3 won, up 0.9 won.

The background for the domestic price increase is the renewed escalation of tensions in the Middle East. On the 12th, U.S. military officials announced that starting from 10 a.m. local time (11 p.m. Korea time on the 13th), all maritime traffic entering and leaving Iranian ports would be subjected to blockade measures. This is interpreted as a move to pressure Iran’s main import routes. Especially, when tensions around the Strait of Hormuz, a key global oil transportation route, intensify, concerns about disruptions to oil supply are often immediately reflected in international market prices.

In fact, international oil prices are rising sharply again. Brent crude futures prices at 9 a.m. on the 13th, based on the benchmark, increased by about 8.7% from the previous trading day (the 10th), reaching $103.44 per barrel. U.S. West Texas Intermediate (WTI) crude futures also surged to $104.93 at the same time, an increase of about 8.7%. Such rapid fluctuations in international oil prices will increase the procurement costs for refineries, which will ultimately translate into upward pressure on domestic petroleum product prices. However, changes in international oil prices usually take about 2 to 3 weeks to reflect in retail prices at domestic gas stations.

Although the government is implementing a maximum oil price system that caps supply prices for refineries and gas stations, completely blocking external variables is not easy. This system was first implemented on March 13, with a second measure on March 27 and a third on April 10. The third cap was set at the same level as the second, i.e., 1,934 won per liter for gasoline, 1,923 won for diesel, and 1,530 won for kerosene. However, if international oil prices continue to rise, domestic retail prices are likely to face additional upward pressure. The future trend of this could depend on how long the tensions in the Middle East and concerns over disruptions in international crude oil transportation persist, potentially spreading to overall domestic oil prices.