High energy prices are fueling inflation around the world including Asia’s fourth-largest economy South Korea as global crude prices hover near 2-1/2 year highs.

South Korea’s top refiner SK Energy, fully owned by SK Innovation, said on Sunday that it would lower gasoline and diesel prices by 100 won per liter for three months from April 7 to help the government of the world’s fifth-largest crude oil importer curb inflation.

The price cuts could cost the company about 300 billion Korean won ($276 million), industry experts said.

“Basically SK Energy cut the prices on government pressure. Investors dumped shares today, with concerns that such price cuts could be repeated,” said a Seoul-based analyst who declined to be identified due to the sensitivity of the matter.

“Personally, however, I don’t think the government could pressure further. If so, they also have to cut oil taxes.”

The country’s second-largest GS Caltex, 50 percent owned by GS Holdings and Chevron, said in a statement that it would soon lower gasoline and diesel prices, without elaborating how much and when.

Brent crude rose above $119 per barrel and US crude hit a 2-1/2 year high on Monday at more than $108 as unrest in the Middle East and North Africa stoked concern over oil supply.

Weekly domestic retail prices of gasoline and diesel for automobile hit record highs of 1,967.2 won and 1,794.6 won per liter last week, after 25 consecutive weeks of rises. Of the retail gasoline price, government taxes account for 47 percent, and 38 percent for diesel.

The government said it would release oil price stabilization measures this week for the world’s fifth largest oil importer.

On the news of the first auto fuel price cut since South Korea’s oil refining market was liberalized in 1997, SK Innovation shares ended down 10.3 percent on Monday, the biggest single-day percentage decline since November 2008, against a 0.24 percent fall by the broader market .

GS Holdings closed down 7.5 percent, and the country’s third-largest refiner S-Oil Corp down by 5.6 percent on concern over their possible price cuts.

“We were surprised by SK’s cut, with no information given earlier. We are internally discussing a similar move, and a decision will be made this week at the earliest,” a source at the country’s smallest unlisted refiner Hyundai Oilbank said.

Officials at S-Oil said they were also thinking of price cuts although nothing had been decided.

Local media quoted industry sources as saying that other refiners might follow suit from late Monday at the earliest.

South Korea’s four refiners produced 111.8 million barrels of gasoline and 268.4 million barrels of diesel last year to meet almost all of domestic demand, industry data showed.

Analysts said the price cut by SK Energy could cost it about 280-330 billion won this quarter. SK Energy declined to comment.

“The price cut is likely to negatively impact the refiner’s otherwise strong earnings,” said HI Investment & Securities analyst Lee Hee-cheol. “The biggest uncertainty is whether the government’s anti-inflation campaign will pressure other refiners to undertake price cuts.”

Park Kun-tae, an analyst at Yuhwa Securities, said: “Shares fell steeply as investors factored in the uncertainty of further price reductions amid the government’s anti-inflation drive. Their second quarter earnings would be weighed down by this cut.”

The government of President Lee Myung-bak, a former construction company chief executive who rose to power in 2008 with promises of above-trend economic growth, in January declared a “war on inflation” and all but banned public schools from lifting fees.

South Korea’s annual consumer inflation in March picked up to a 29-month high and was far above the central bank’s target, Statistics Korea data showed on Friday, mainly as a result of costlier energy prices.