Addressing the latest spike in gas prices, stemming from the uncertainty associated with tighter US sanctions on Iranian oil, South Korea’s chief economic policymaker vowed Monday to bring stability to the domestic market while at the same time bracing for the full impact of the sanctions.

“To brace for the possibility of a short-term spike in global oil prices, we plan to revitalize the use of budget gas stations and e-commerce to boost competition in the local oil market as efforts to bring stability to domestic gas prices,” Hong Nam-ki, deputy prime minister and minister of economy and finance, said at a meeting with government officials in Seoul.

Hong added that the government had “cooperated actively” with the US since the world’s largest economy reimposed sanctions on Iran last year and was now preparing for various contingencies, including “worst-case scenarios.” 

Korea, China, India and five other countries were affected by the US’ decision last week to end its sanction waivers Thursday regarding Iranian oil imports. The sanctions were announced last November after the US withdrew from the 2015 Iran nuclear deal.

In response to escalating concerns over trade, the minister reassured those present that Korea’s reliance on oil shipped from Iran had decreased and so had the volume of crude oil imported from the Middle Eastern country.

Iranian crude accounted for 13.2 percent of Korea’s total oil imports in 2017, but that figure dropped to 5.2 percent last year. Iranian oil accounted for 5.4 percent of the country’s total imports for the first two months of 2019, making Iran the country’s sixth-largest oil supplier after countries like Saudi Arabia and Kuwait.

Hong noted the struggles the nation’s petrochemical sector faced, saying the government would diversify its oil import channels and map out plans to utilize raw materials as replacements.

For local small and medium-sized enterprises, which have limited options compared with conglomerates, an emergency fund and a plan to help them seek alternative markets will be provided, according to Hong.

The nation’s retail gas prices had risen for the 10th consecutive week as of Friday, according to the Korea National Oil Corporation, and are expected to see further hikes in the coming weeks.

The price of Korea’s benchmark Dubai crude came to an average of $70.35 per barrel for the April 1-23 period, up from $59.10 in January.

Hong’s remarks come a day after a report from the Bank of Korea projecting higher volatility in global oil prices due to the Iran sanctions.

“Amid increased instability in oil supply due to Iranian sanctions, OPEC’s production cut and geopolitical risks will add to the volatility of the global oil price,” the report said. 

Meanwhile, the finance minister also said the government had no plans to revise the country’s economic growth rate forecast, despite the BOK’s recent reports indicating a serious economic slowdown.

The Finance Ministry has set the growth outlook for the nation’s economy between 2.6 percent and 2.7 percent this year, but the BOK said the gross domestic product had backtracked an estimated 0.3 percent in the first three months of the year from the previous quarter -- its worst performance in an almost a decade.

By Jung Min-kyung (mkjung@heraldcorp.com)