Taiwan enacts price stabilization mechanism as oil prices spike

台灣因應油價飆升 推出價格穩定機制

TAIPEI (Taiwan News) — Taiwan has activated an emergency fuel price stabilization mechanism as rising tensions in the Middle East push international oil prices higher, with state-run CPC Corp. set to absorb at least 60% of price increases, per CNA.

Vice Minister of Economic Affairs Lai Chien-hsin (賴建信) said on Tuesday that the emergency measure will operate alongside Taiwan’s existing dual price-mitigation mechanism. The absorption rate will be reviewed weekly until the regional conflict subsides, reducing the impact on domestic fuel prices and the broader economy.

He said Iran’s partial blockade of the Strait of Hormuz has disrupted global oil supply routes, prompting CPC to seek alternative delivery channels. Taiwan currently holds oil reserves equivalent to about 150 days of supply. Natural gas reserves for March and April also exceed safety thresholds, standing at 11.9 days and 11.5 days, respectively.

Lai said the dual price-mitigation mechanism is already helping cushion consumers from fluctuations in global oil markets. However, with crude oil prices exceeding NT$3,493 (US$110) per barrel on Tuesday morning amid escalating tensions with Iran, authorities have implemented the additional emergency mechanism.

Under the current system, the government sets stabilization thresholds based on the retail price of 95-octane gasoline. If the price reaches NT$32.50 (US$1) per liter, CPC absorbs 25% of the increase. If the price reaches NT$35 per liter, CPC absorbs 50%. If the price reaches NT$37.50 per liter, CPC and the government jointly absorb 75% of the increase.

Under the new measure, the dual price-mitigation mechanism will first be applied, after which CPC will absorb at least 60% of any remaining price increase. The Cabinet also convened a price stabilization meeting on Tuesday to assess the impact of the measure on household finances, industry, inflation, and the broader economy.

Lai said the additional stabilization measures are tied directly to the current geopolitical situation. Once the conflict-driven volatility in energy markets subsides, Taiwan will revert to relying solely on the existing dual price-mitigation mechanism.

Premier Cho Jung-tai (卓榮泰) told reporters at the legislature on Tuesday that the emergency mechanism for gasoline and diesel prices has been activated. He added that the existing dual price-mitigation system will also remain in place, in line with the principle of keeping fuel prices lower than those in neighboring Asian economies, including Japan, South Korea, Hong Kong, and Singapore.