Gov't may expand vehicle rationing to private sector if fuel prices rise, finance minister warns

The Korean government may implement a five-day vehicle rationing system for private sector drivers if oil prices rise to $120-$130 per barrel, amid concerns over supply disruptions and rising fuel prices.

Finance Minister Koo Yun-cheol, center, speaks to reporters at the government complex in central Seoul on March 26. [YONHAP]

The government may soon require drivers in the private sector to follow a five-day vehicle rationing system — restricting cars from operating on one weekday each week — if oil prices rise to between $120 to $130 per barrel, according to Deputy Prime Minister and Finance Minister Koo Yun-cheol on Sunday.

The potential measure, already in place across the public sector, underscores growing concerns about supply disruptions and the need to curb fuel consumption.

“If oil prices rise to $120 to $130, we may need to introduce the system for the private sector as well,” Koo said Sunday during an appearance on the KBS television current affairs show “Sunday Diagnosis” (1999-). “If the situation in the Middle East worsens, the resource security alert may need to be raised to Level 3, and at that point, consumption should also be reduced.”

The government had already mandated the system for public institutions, effective Wednesday. The last time such rationing was imposed on the private sector was during the Gulf War in 1991.

"Multiple factors will determine whether the alert level is raised," Koo said. “We will take a comprehensive view, including whether oil prices rise from the current $100 to $110 range to $120 to $130.”

Drivers fill up their cars at a gas station in Seocho District, southern Seoul, on March 26. [NEWS1]

The resource security alert system consists of four levels — interest, caution, alert and severe — with higher levels reflecting escalating supply risks. The government issued a “caution” alert for crude oil at 3 p.m. on March 18, citing rising prices and growing uncertainty in global supply routes.

Global oil prices have continued to climb amid reports of additional U.S. troop deployments. On Friday, Brent crude rose 4.2 percent to $112.57 per barrel. Compared to the level on Feb. 27 before the conflict escalated, Brent crude has surged 55 percent.

Concerns are also growing that the Red Sea, seen as an alternative shipping route to the Strait of Hormuz, could become unstable after Yemen's Houthi rebels declared their involvement in the conflict. Saudi Arabia has been rerouting exports through pipelines to the Red Sea port of Yanbu after disruptions in the Strait of Hormuz. Any instability in the Red Sea could further increase upward pressure on oil prices.

If the conflict drags on, Korea is expected to face a dual burden of supply disruptions and rising prices.

Opinet, a government-run fuel price information service, saw gasoline prices in Seoul standing at 1,914.46 won per liter ($4.80 per gallon) as of 4 p.m. Sunday, up 17.86 won from the previous day. The nationwide average rose 8.9 won to 1,864.76 won per liter. Prices could climb further once inventories secured under the previous price cap are depleted.

The government raised the maximum retail price of petroleum products supplied to gas stations by 210 won per liter on Friday.

Minister of Climate, Energy and Environment Kim Sung-whan explains the five-day car restriction system during a press briefing on March 24 in central Seoul. [NEWS1]

As disruptions in the Strait of Hormuz persist, the government is shifting its focus from price stabilization to supply management. It implemented restrictions on naphtha exports on Friday and has begun fully reflecting global price increases in domestic fuel price caps to curb consumption.

Further fuel tax cuts remain under consideration to cushion the impact on households, Koo said.

“We did not implement the full fuel tax cut at once and have left room for additional reductions.”

On Friday, the government expanded fuel tax cuts, lowering the gasoline tax from 7 percent to 15 percent and the diesel tax from 10 percent to 25 percent. The legal maximum reduction stands at 30 percent.

Koo also drew a line on the possibility of raising property holding taxes, saying that “nothing has been decided yet, as we are still listening to various opinions.”

"We will first pursue policies such as expanding supply and curbing capital inflows, and if that proves insufficient, we may ultimately consider property-related taxation as a last resort," he added.

Speculation had emerged that the government was reviewing a property tax increase after President Lee Jae Myung shared on his X account an article comparing property holding taxes in major cities with those in Seoul last Tuesday.

“I understand that his remarks were intended to mean that, as a last resort, property-related taxation could also be considered,” Koo said.

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 AHN HYO-SEONG [lee.jiwon10@joongang.co.kr]